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Yahoo
15-04-2025
- Business
- Yahoo
Why Economists are Talking About ‘Soft' and ‘Hard' Data
Several recent consumer sentiment surveys have shown a deterioration of 'soft data.' However, economists are still waiting to see if it appears in the 'hard data' of retail and inflation reports. Soft data generally tracks the sentiments of consumers and business leaders. Economists look to this data for clues about what comes next in the economy. Hard data enumerates pricing, spending, hiring and other economic activity over the wake of President Donald Trump's tariff announcements, economists and analysts have grown nervous that lower sentiment could foretell a slowdown in economic activity. Some economists expect that recent poor consumer and business sentiment will begin showing up in the economy in the form of slower sales and weaker growth. So far, there's little indication that those feelings have turned into actions, as there have yet to be noticeable changes in data that would demonstrate a meaningful pullback in the economy. "Given where we are, it seems like only a matter of time before grim sentiment feeds into the hard data,' Nationwide Financial Market Economist Oren Klachkin wrote after last week's disappointing consumer sentiment results. 'This may not occur right away because of front loading, but softer spending is likely on the horizon." So-called 'soft data' are generally survey results of either consumers or business leaders that show how people feel about the economy. Market watchers track sentiment surveys for consumers, small businesses, and home builders, among others. Closely followed Purchasing Managers Index (PMI) surveys of manufacturing and service sector executives are another example of soft data. "Hard data' mostly comes from measurements collected during business activity, like prices charged, sales volumes, job listings, and factory production levels. U.S. jobs data, inflation reports, and gross domestic product (GDP) readings are examples of hard data. 'Hard data provides a factual basis for analysis, while soft data offers valuable insight into the sentiment surrounding the economy," wrote Steve Latham, chief investment officer at Bernicke Wealth Management. "By assessing both types in tandem, we can make more informed decisions." Soft data is important because sentiment can result in actions. People who worry about the economy may not go out and spend. For example, since the U.S. economy heavily relies on consumer spending, poor consumer sentiment surveys can make economists nervous. 'A dour consumer outlook is likely to lead to households reining in spending either in anticipation of tougher economic conditions ahead or in response to higher prices on a range of goods,' said Jim Baird, chief investment officer with Plante Moran Financial Advisors. Weakening sentiment hasn't shown up yet in most hard data, especially since tariffs may lead some consumers and business owners to increase short-term spending to make purchases before tariffs take effect. Indeed, job growth has remained robust despite the economic jitters, and retail spending is expected to rebound in March after a slow start to the year. But with tariffs in place, some economists say it's only a matter of time before hard data reflects the soft data. 'The bottom line is that the incoming data remains solid, but the soft data is deteriorating," wrote Apollo Chief Economist Torsten Slok. "With tariffs not going away, the observed weakness in the soft data should be expected to spill over to weakness in the hard data over the coming months." Read the original article on Investopedia
Yahoo
01-04-2025
- Business
- Yahoo
Tariff Fears Reverse Recent Gains in Manufacturing Sector
President Donald Trump says tariffs are designed to bolster U.S. manufacturing sector by encouraging more domestic production of goods. However, the manufacturing sector is experiencing slowing demand and increased costs as uncertainty persists about the details of major tariff policies. Surveys of manufacturing executives released Tuesday showed weak production, orders and may be designed to bolster manufacturing, but the sector is starting to show nerves amid uncertainty around the import taxes. Two manufacturing industry surveys Tuesday showed that managers in the sectors saw slowing business in March, reversing recent growth. While tariffs continued to weigh on short-term sentiment, the surveys also showed that manufacturers were becoming increasingly worried about tariffs' long-term effects. 'Production and new orders portrayed weaker dynamics and businesses were less eager to hire in a less certain environment,' wrote Nationwide Financial Market Economist Oren Klachkin. The manufacturing Purchasing Managers Index (PMI) for March fell to 49%, indicating a contraction in business activity coming after two months of growth in the Institute of Supply Management's (ISM) survey. Before registering expansion in January and February, the ISM survey showed nearly two straight years of contraction in the U.S. manufacturing sector. Factory managers struggled with inflated prices and high borrowing costs. However, uncertainty around tariffs policy is taking its toll on the sector, as survey results showed that potentially higher import taxes were at the top of manufacturing executives' minds. The ISM survey also showed that prices rose while new orders declined, hiring slowed and inventories piled up as manufacturers bought supplies ahead of the tariffs. A similar report from S&P Global also reflected declining sentiment in the manufacturing sector. 'A front-running of tariffs and shift to minimize import exposure is driving up prices, while persistent uncertainty is crimping underlying demand and leaves manufacturers longing for clarity,' wrote Wells Fargo economists Shannon Grein and Tim Quinlan. The reports come ahead of Wednesday's 'Liberation Day,' on which Trump is set to announce new tariff policies that could impact business with a wide swath of U.S. trading partners. Trump has promoted tariffs as a means to help the struggling U.S. manufacturing sector by encouraging more domestic production of goods. However, uncertainty over what the details of the tariff policy will be moving forward is dampening some manufacturers' outlook, said Chris Williamson, chief business economist at S&P Global Market Intelligence. 'Business optimism about the year ahead has deteriorated further from January's near three-year high and has dropped sharply over the past two months, causing firms to stop raising payroll counts for the first time since October,' Williamson said. Read the original article on Investopedia
