Broker Check

Economy -- which way?

April 26, 2019

Are you hearing conflicting economic analysis?

This morning I received some economic data analysis reports from two different sources.  The first explained that the dollar hit its highest level of 2019 as new U.S. home sales increased 4.5% in March.   This was clearly stated as a positive economic indicator and good news to be shared.  The second analysis focused on a related, but slightly different measurement.  That headline stated that March housing starts eased to 1.139 million, the lowest reported month since May, 2017.   Housing starts were reported down 14.2% compared to the prior year and down 9.7% from January.

What's the difference between sales and starts?

There is certainly a difference between housing sales and housing starts, but as economic indicators, one would expect them to be trending in the same direction.  This is certainly a mixed signal on the economy when someone takes the time to look at and compare all of the data.   Yet in the analysis of two experts, who publish and distribute comments daily, there was no mention of this conflict.  Even more mystifying is that both of them chose a perspective on the economy they wanted to present, and highlighted their piece of information with a bold headline and an opposing slant on their outlook for the future.

What's the takeaway?

My take is that we must be wary of anyone drawing broad conclusions based upon a sliver of data. Somewhere deep in my past, I’m sure that I studied enough logic to know when a conclusion can be considered valid. In my opinion, professional economists should be less concerned about headlines and circulation numbers and more interested in unbiased analysis.