In the aftermath of last November’s election, and particularly since the start of 2017, a number of surveys (“soft” data) have shown consumers and businesses alike to be almost overwhelmingly upbeat. Examples include the University of Michigan’s U.S. consumer confidence index, which has risen to levels last seen prior to the Great Recession. Also, the Wells Fargo/Gallup Small Business Index survey (posted in mid-March) reported optimism among small-business owners “soaring” to its highest reading in a decade. Finally, a survey published by the National Association of Manufacturers at the end of March found that 93% of the 14,000 companies surveyed felt positive about their economic outlook. That is the highest percentage in the survey’s 20-year history, up from 56.6% one year ago and 77.8% in December.
The rub is that “soft” data rarely correspond to what eventually unfolds in the economy. For example, the correlation between consumer confidence and spending is weak at best. Comparing historical aggregates of consumer and business data also indicates that activity measured by “hard” data typically fluctuates much less than might be expected from the significant swings in “soft” data. Much as we would hope such optimism might provide a late-cycle “second wind,” a plethora of indicators suggest to us the economy will have to contend with tangible headwinds rather than tailwinds from ephemeral optimism. What follows are “hard” data metrics, published during the past month, which provide a mixed perspective regarding economic direction….
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The Macro Pulse blog is a commentary about recent economic developments affecting the forest products industry. The monthly Macro Pulse newsletter typically summarizes the previous 30 days of commentary available on this website.