Economists are “surprised” that American economy is doing so poorly.
I think the best way to read economic news is to put some words in quotation marks, implying sarcasm. Our economists operate on the premise that they want to boost consumer confidence because that will boost the economy. So their automatic default is to be wildly optimistic whenever possible. This means that, when they are finally forced to reverse themselves and admit to how horrible the economy is doing, they must always claim to be surprised.
So I would alter the Bloomberg headline like this: “‘Surprise’: U.S. Economic Data Have Been the World’s Most ‘Disappointing.’”
It’s not only the just-released University of Michigan consumer confidence report and February retail sales on Thursday that “surprised” economists and investors with another dose of underwhelming news. Overall, U.S. economic data have been falling short of prognosticators’ “expectations” by the most in six years.
The Bloomberg ECO U.S. “Surprise Index,” which measures whether data beat or miss forecasts, fell to the lowest since 2009, when the nation was in the deepest recession since the Great Depression.
Basically, the people making predictions about the economy are always trying to “stimulate” it for political reasons or because their job is to sell financial investments. Any time you tell people that the economy stinks you are encouraging people to withdraw from the market. If they withdraw from the market, they end up hurting the economy. So their habit is to always try to say that the economy is doing great.
Until it’s not and the damage can no longer be hidden. Then they are suddenly “surprised.”
And they encourage you to always believe that they have complete mastery over the economy. They are the best and brightest. Then, when they have to admit the economy is bad, and claim to be surprised, they always insist that no one could have foreseen the problems. Everyone who matters was taken by surprise.
This month alone, personal income and spending, manufacturing as measured by the Institute for Supply Management, auto sales, factory orders, and retail sales have all come in a bit weak.
Citigroup keeps economic surprise indexes for the world, and its scoreboard shows the U.S. is most disappointing relative to consensus forecasts, with Latin America and Canada next, as of March 12.
There is also another kind of surprise. The one thing we kept hearing about was how many people would be hurt economically by falling fuel and energy prices.
Emerging markets were supposed to be hurt by falling oil prices but are now delivering positive surprises.
Well, what do you know?! Even economies that were largely based on oil revenue are still benefiting from cheap energy. Even though their major industry is suffering other industries are picking up the slack—a benefit of cheap oil.
The lesson here though is that, if you don’t want to be surprised by bad economic news, don’t listen to mainstream economists.