With all of the economic data that gets released, there is some that carries more weight than others. So which type of data carries more weight?
Looking at the different economic data reveals that it really comes in two flavors: hard or soft. Soft economic data usually comes in the form of surveys and interviews and gauges sentiment on how things are going, while hard economic data tells you what actually happened by looking at the numbers that get reported.
For example, the University of Michigan Consumer Confidence Index is a survey (soft data) that gauges consumer’s opinions on the economy. In the most recent release, the index came in at 96.9 and is hovering near its 52-week high of 98.5 based on consumer’s optimism on higher expected incomes and wealth, more favorable job prospects and low inflation expectations. Contrary to the consumer optimism found in the recent surveys, Retail Sales has continued to deteriorate with the latest reading coming in at a 0.1% month over month increase.
While the soft data can give us an indication on the current state of the economy from individuals perspective it is the hard data that really reinforces the underlying trends.
