The sun is finally coming out for US economic data.
After an 18-month stretch in which regular data releases were more likely to surprise to the downside than the upside, it appears that these data points are finally turning positive, according to Binky Chadha, chief global strategist at Deutsche Bank.
“US data surprises jumped sharply in the last 2 weeks, moving into positive territory for the first time in a record 18 months,” wrote Chadha in a note to clients on Friday.
“With strong rebounds in manufacturing and services PMIs as well as in payrolls, recent data conforms to our thesis that the US is emerging out of a severe dollar and oil shock.”
The Citigroup economic surprise index, which measures how disappointing or positive data points are in relation to their projections had remained below zero since early 2015. Recently, however, positive economic surprises like the dynamite jobs report and stronger manufacturing data have contributed to a little positive bump in the economic picture.
Whether this is because of lower expectations or stronger data, it is encouraging going forward as well. Since expectations are somewhat reserved for upcoming data, according to Chadha, it appears that the positive surprises are going to keep coming.
“The strength of new orders in both manufacturing and services suggests activity should continue to recover but the forward consensus remains subdued, pointing to positive surprises continuing,” wrote Chadha.
“A typical positive up-cycle historically lasted 2.5 months on average.”