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Making sense of stats that don’t make sense


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With all the conflicting economic data that’s come out lately, it’s hard to make head or tail of what’s going on in this economy.

Jobless claims hit new lows this week, which is good. On the other hand, retail spending numbers were down, which is bad. On the other other hand, consumer sentiment numbers hit their highest level in 15 years.

You’re not crazy if trying to make sense of this stuff makes your head hurt.

“It’s a general thing humans do to get their hands around big complex sets of information — we put a story to it,” said George Pearkes, macro strategist at Bespoke Investment Group.

A lot of times, that story doesn’t make any sense.

“You’re not always going to see exactly the same read on a given month from two different data sources,” he said.

Month-to-month data just isn’t that reliable. Political headlines can shift, there can be weather problems and sometimes data is simply glitchy.

That’s why many economic indicators are revised the following month, said Mark Luschini, chief investment strategist at Janney Capital Management.

“When the new report comes out, perhaps the number in the new report not only looks better, but there was a revision upward to the previous numbers,” he said.

Many economists say they prefer long-term trends to monthly figures.

“When I used to work on Wall Street, we would always joke that … wouldn’t it be great to get rid of the monthly data, and only put out data on a quarterly basis?” said Drew Matus, chief market strategist at MetLife Investment Management.

Matus says there’s another problem — some of the economic data we collect is a little old-fashioned: industrial production numbers, durable goods orders, inventories …

“Most of our data collection is geared toward manufacturing,” Matus said, “and we’ve turned into a service-sector economy.”

Matus says the labor market is a much better measure of how the economy’s doing. Lately, it’s been pretty strong, a factor that’s propped up consumer sentiment.

Another factor keeping consumers optimistic? Even though we always say the stock market isn’t the economy, it’s had a pretty positive influence lately, says Pearkes.

“When the stock market’s performing well, as it has in Q1 and most of Q2 this year, then consumers are generally going to feel pretty positive around things,” he said.

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