There are at least 130 economic indicators each month, but there has never been a time when all 130 indicated the same condition of the economy. Considering all the different organizations producing all these indicators using different methodologies, it should not be surprising, but it can be confusing.
For example, the latest report on durable goods disappointed with a 1.3% decrease, despite the fact it was expected to increase 0.5%. This is a significant difference and could suggest a turning point in economic growth. The same day, we learned that consumer confidence rose unexpectedly to 94.5, which is the highest level since 2007. This could suggest a strengthening economy, since consumer spending is 67% of GDP. So, what is a person to believe, with two economic indicators indicating different things?
One approach is to do a "deep dive" into the data, where you would find the durable goods number was skewed by the wildly volatile category of non-defense aircraft, which fell 16.1%. The other categories were relatively as expected. So, the drop in durable goods is not as alarming as it first appears.
Diving deeper into the consumer confidence, it is clearly dependent on two factors, i.e., the improving job market and falling gas prices. Reverse either and the level of confidence will decrease. One worrisome piece of data is that the percentage of people planning to buy a house dropped from 5.5% last year to 5.1% now. So, the increase in consumer confidence is not a reassuring as it first appears.
Another approach to understanding conflict among the 130 economic indicators is to simply talk with your friendly neighborhood economist and ask for his/her "gut-feel" only. If you ask for more than his/her gut-feel, grab a cup of coffee and sit down -- you'll be there awhile.
For example, the latest report on durable goods disappointed with a 1.3% decrease, despite the fact it was expected to increase 0.5%. This is a significant difference and could suggest a turning point in economic growth. The same day, we learned that consumer confidence rose unexpectedly to 94.5, which is the highest level since 2007. This could suggest a strengthening economy, since consumer spending is 67% of GDP. So, what is a person to believe, with two economic indicators indicating different things?
One approach is to do a "deep dive" into the data, where you would find the durable goods number was skewed by the wildly volatile category of non-defense aircraft, which fell 16.1%. The other categories were relatively as expected. So, the drop in durable goods is not as alarming as it first appears.
Diving deeper into the consumer confidence, it is clearly dependent on two factors, i.e., the improving job market and falling gas prices. Reverse either and the level of confidence will decrease. One worrisome piece of data is that the percentage of people planning to buy a house dropped from 5.5% last year to 5.1% now. So, the increase in consumer confidence is not a reassuring as it first appears.
Another approach to understanding conflict among the 130 economic indicators is to simply talk with your friendly neighborhood economist and ask for his/her "gut-feel" only. If you ask for more than his/her gut-feel, grab a cup of coffee and sit down -- you'll be there awhile.
