US data does the splits

published 14 April 2017

An unusual pattern has appeared in the US economy. "Hard" and "soft" data "are splitting so dramatically that an Olympic gymnast would applaud", says Robin Wigglesworth in the Financial Times. Soft data refers to business and household sentiment surveys; hard data arethe official statistics.

The real-economy data "continues to bumble along at [an] uninspiring speed". Retail sales barely grew in February, for instance. Yet consumer confidence has reached its highest level since 2000. The gulf between hard and soft statistics hasn't been this wide since 2000, according to Morgan Stanley.

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The divergence is "a fascinating study in perception of the US economy versus the reality", says Elena Holodny on BusinessInsider.com. The gap opened up after Trump's election as hopes of a fiscal stimulus package and deregulation spread. Whether the official data catches up will depend on what the government can achieve. Developments in Washington will soon indicate what we can expect, but the danger is that investors continue to overestimate the scope for stimulus. In conjunction with eye-watering valuations, that means the reflation trade in US-led global markets could come to a sticky end.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.