Courtesy of Mish
I have commented for months that soft economic data from various diffusion indexes does not match actual economic activity.
Some highly touted soft measures never match economic data except by accident. Consumers sentiment is the prime example.
Yet, once again, most of the investment community believes in the strong “second-half recovery” theory instead of looking for reasons why soft data is not going to harden.
Record Gap Between Hard and Soft Data
Financial Times writer Gavyn Davies asks Global surveys or hard data – which are the fake news?
Davies says “The inclusion of survey or soft data in nowcasting models is crucial to improve the accuracy of the signals produced by these models in real time.”
He concludes that hard data understates growth and expects a much stronger second quarter.
Economic Noise
John Hussman has a different conclusion. Hussman proposes that this late in the cycle, soft data is typically noise.
