If you haven't noticed, you can tell you that there have been a lot of disappointing US economic data recently:
The April non-farm payrolls report fell far below market expectations, sparking a debate about whether the labor market has tightened
The latest CPI figures are much higher than expected, due to some areas related to the reopening of the economy.
New housing starts fell more than expected in April, suggesting supply chain constraints and rising raw material costs continue to weigh on builders
Overall, expectations for economic growth are still high. But to some extent, reality also seems to be coming.
Citi's economic surprise index, which measures the extent to which economic data beat or fell short of expectations, is at its lowest level in nearly a year. If there are a few more disappointing data, it may turn negative.
The last time the index was in this position was in June last year.
When it comes to the incredible stock market rally we have seen since last spring, you might say that one of the drivers is the continued underestimation of the economic recovery by investors. At that time, few people believed that the economy would rebound so quickly. Everyone has been waiting for the other boot to land. Remember the premature fiscal tightening? Remember the upheaval before and after the election? Remember the slow release of the vaccine or the risk of mutation? In retrospect, there was always something that made people too pessimistic.
However, when the index becomes negative, nothing special will happen. This does not mean that the economy has suddenly taken a turn for the worse. This only means that the economic data are no longer stronger than the market expected. More than a year has passed since the COVID-19 crisis broke out, and the economic situation no longer surprises forecasters.