The Trump bump may be finally showing up in the hard data.
Recent data releases about the US economy appear to show that economic activity in the US has increased, following surges in post-election enthusiasm in surveys.
Since President Donald Trump was elected in November, various measures of economic confidence — from University of Michigan’s consumer confidence to CEO confidence to manufacturing firm confidence — have increased, some hitting record highs.
While surveys are important and can be a leading indicator of economic activity, “hard data” — or economic data that measures actual actions by businesses and consumers — were until recently lagging behind the “soft data.”
In the past few weeks, however, the hard data has begun to catch up to the enthusiasm from Americans that surged after the election.
For one thing, the labour market has outpaced expectations over the past few weeks. On Thursday, initial jobless claims came in at 234,000 and marked the fifth time in eight weeks claims were under 240,000. Claims had not been under 240,000 in a week at any point between December 1973 and December 2016.
The January jobs report also beat expectations soundly, with headline jobs gains coming in at 227,000 against expectations of 180,000. Though wage gains did disappoint, the labour force participation rate showed some Americans moving back into the workforce.
There was more solid economic data on Wednesday and Thursday, with strong data on the consumer and housing fronts.
Perhaps the biggest sign that enthusiasm was translating into the real economy was a report showing that US retail sales increased 0.4% in January, well above the 0.1% expected by economists. Core retail sales and even revisions to the previous month’s sales showed stronger spending by US consumers.
Additionally, while housing starts slid by 2.6% from the month before, the seasonally adjusted annual start rate of 1.246 million came in higher than economists’ expectations.
On a more aggregate level, the hard data is actually outperforming soft data recently according to a note from Bespoke Investment Group.
“As shown at left, hard data has actually come in stronger relative to expectations than soft data recently per the Nomura Hard and Soft economic data surprise indices,” said a note from Bespoke. “With prints like housing starts and initial claims this morning, that’s not hard to believe.”
Bespoke also noted that economic surprise indicators from Bloomberg and Citi — which measure the positive or negative difference between economists’ expectations for a data point and the actual number — have shown significant improvements since the current round of data started to roll out. In fact, according to the note, the Bloomberg index is at the highest level since 2012.
“In our view, the explosive improvement in economic data on a relative basis has been a major support of the 15%+ move in equity prices since the election,” said the note from Bespoke.
To be fair, industrial production did miss on Wednesday, but the overall thrust of the “hard” data from housing to labour to retail sales has been strong.
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