Hard data would be the economic announcements from collection of real activity. Soft data is the collection of data on opinion or surveys. For example, hard data will be unemployment and industrial production while soft data would be consumer surveys. Soft data is represented by the University of Michigan consumer survey indices. Hard data usually comes with a longer lag while soft data is more current.
A strong economy will have soft and hard data both being positive. An economy in transition will show divergences between these two groupings. There is a current divergence between hard and soft data. Unemployment data show a robust economy at 3.8% and initial jobless claims have fallen below 200,000, yet soft data is showing increasing signs of worry. The Michigan current economic and consumer expectations both show significant declines that take us back to the Great Financial Crisis.
The Michigan inflation expectations show one year ahead numbers well above 5% and above the 4.3% forecast of the Fed for 2022. The jump has been especially strong for the last month even with the Fed sounded the alarm on inflation and raising rates.
If you have a choice in an uncertain world, go with the more recent soft data. These expectation data may be noisy; however, it will give you a job on the volatile dynamics.
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