More Than A Benchmark Peeve

Why do economic data providers continue to overstate reflationary periods? This is more substantial than a pet peeve, though to many if not most it might seem like splitting hairs. We’ve seen this happen repeatedly with each eurodollar cycle. The more egregious economic overstatements were definitely 2014’s, the data errors contributing at least something to the confusion and narrative mistake, yet the same keep piling up even today as if no one learns from it.

High frequency data in order to be high frequency has to be gathered from a smaller sample size. Nature of the beast. This, however, leaves open a more than a trivial chance of allowing imprecision to enter and taint the data. Add to this subjective application of statistical elements, particularly the oft-misaligned “trend-cycle” component, suddenly bigger revisions have become more common post-2008.

To put it simply, and what happened repeatedly during Reflation #2 (2013-14), was how these subjective and more error-prone process components helped fuel the idea that the economy was more robust than it really had been; adding some unknown degree of gravitas to the recovery narrative while it was undermined, correctly, as it turned out, by any number of real-time (bond) market indications.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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