Essential Economics

— Mark Frears

Are you ready?

Do you like surprises? Guess that may depend on whether they are positive or negative. It is not pleasant to walk into your house after a week’s vacation and find the water heater leaked, but it can be fun to walk into the laundry room and find the wash has been done! (And the detergent worked.) Some would rather not have any unexpected events, while others would think that was boring. Different strokes for different folks.

Economic releases tell the story of the underlying strength or weakness of the country or region. There is an entire universe of people dedicated to predicting/forecasting these metrics. How good are they?

Data

Do you think the markets like surprises? Again, positive ones should be a good thing. Yes, there is an indicator for that; the Citigroup US Economic Surprise Index. As you can see below, 2020 had a big pop, but in 2025, we have been trending down, until the last month.

To clarify, this is not measuring economic strength. This shows us how actual data compares to the analyst’s expectations/predictions for the releases. For example, if the analyst’s prediction for nonfarm payroll is an addition of 300,000 workers, and the actual is 200,000, this is a significant “surprise” or miss on the actual versus forecast. This would be a negative impact on the Index, as it is below expectations.  

As you can see in the chart for 2020, early on there were many negative readings, as analysts could not accurately predict releases. In mid-2020, the readings were positive, as prognosticators underestimated the economic indicators. More recently, the surprises have been more stable, but we are on a downtrend since Q3 2024, meaning the releases have been lower than expected.

One thing this index can show us is momentum of the economy. If it is in a negative trend, like recently, it can show that the actuals are disappointing versus the forecast and foretell a slowing economy. One more thing for you to monitor as you wade through the myriad of economic news.  

Across the pond

Considering the increasing global focus, let’s look at how this index works in Europe. As you can see below, the U.S. index shows more unexpected releases than Europe. This is the first time since early February.  

While we saw better equity results out of the international sector earlier this year, the trend may now be changing.

Hard versus soft

Another thing to watch on economic releases is whether they are actual numbers, as opposed to confidence/sentiment indicators. Hard data continues to show a growing economy, but as soon as a positive number comes out, economists are looking at that as “history,” or prior to tariff impact. So, hard data is being discounted, and soft data (confidence or sentiment) is much lower, primarily due to the uncertainty of the economic and political environment. Stay tuned to see if positive hard data continues.

Economic releases

Last week had decent hard data with durables and new home sales. Soft data weaker with Consumer Sentiment flirting with recessionary levels.

This week’s calendar is packed, with Q1 GDP and payroll releases topping the charts. See below for details.