Financial Advice for Retirement, Social Security, IRAs and Estate Planning

Economic Surprises are Negative

June 27, 2017

One widely-watched index that’s worth the attention is Citigroup Economic Surprises Index. The index tracks whether economic data are better than consensus expectations (positive surprises) or worse than consensus (negative surprises). While there isn’t a precise correlation, when there’s a series of negative surprises, that tends to be bad for markets as investors recalibrate their expectations and adjust their portfolios. Negative surprises also can be a sign of a declining economy. Lately, the index has been on a run of negative surprises, so it’s worth watching the economic data more closely in coming months. Perhaps investors shouldn’t be as complacent as they have been.

Citigroup’s Economic Surprise Index, a widely followed indicator of how the data are matching up to expectations, continues to plumb new depths.

In fact, the index hasn’t been this low since late August 2011, when the White House and Congress brought the country to the brink of a debt default, economists worried about a double-dip recession, and the European debt crisis raged on.

The Citi index almost by design zigs and zags — data points miss economists’ optimistic projections, sending the gauge lower, after which they recalibrate their views and adjust their estimates lower. That adjustment then usually prompts a move higher in the surprise index.

However, it’s been since January to July 2012 since the index has seen higher highs and lower lows.

 

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