US Growth and Inflation Surprise Indices

How to interpret the charts below

These indices measure the difference between forecast and actual data for all major data releases in the US that relate to Growth and Inflation. Currently that’s 37 macroeconomic indicators for Growth and 24 for Inflation. Instead of just taking the delta between the forecast and actual, I’ve used the delta between the forecast and actual scores derived from the regime model to create these indices. This means a much better signal to noise ratio.

An increasing index means actuals are beating expectations. A falling index means actuals are coming in worse than expectations.

The index oscillates around 0 with readings > 0 (blue) signalling a positive trend and vis-versa.

Surprise!

In theory, economic data is already priced in, which is why markets often show flat returns during economic strength and recoveries during periods when the economy is still in recession. That’s when surprise indices like the below can be helpful as they measure deviations from expectations.

 

Premium Content available to Newsletter subscribers only.