GDP Growth - Only 1.08% Expected In Q1

GDP Growth - Citi Economic Surprise Index Crashes

In this article, we will review some top-down analyses of the economy. 

As you can see from the chart below, the Citi Economic Surprise index fell 31.1 points in one day which is the biggest one day drop since January 2006. The Citi surprise index measures how economic reports do, compared to expectations. 

Clearly, economists didn’t foresee the economic slowdown in the past few months. The stock market saw this coming in real time as it fell in Q4 when the economic deceleration picked up steam.

(Click on image to enlarge)

Some sentiment reports weakened in January and February because of the shutdown and stock market volatility. But those don’t matter. They will be reversed because the government made a deal to stay open. And also because the stock market has gained back most of its Q4 losses. 

This index was also hurt by the December retail sales report, the November business inventories report, and the January industrial production report. The index isn’t as much of a leading indicator as some think it is if results from November and December are still affecting it.

This decline negatively impacted Q1 GDP tracking estimates. I previously used various global economic surprise indexes to show how America is outperforming. 

It might still be outperforming if Europe continues to plummet. It’s worth noting that the big crash in January 2006 didn’t mean much as there wasn’t a recession until December 2007. If there’s a recession in March 2021, it doesn’t mean stocks need to fall now. It’s likely that time frame won’t repeat. I’m just explaining how this doesn’t mean the economy is crashing.

GDP Growth - Weekly Leading Index Falls Slightly

As you can see from the chart below, the ECRI leading index is down 4.3% year over year. That's worse than the 4% decline it showed last week. 

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