Here's Why Some Economic Data Matters More Than Others (Anniversary)
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Bloomberg Audio Studios. Podcasts. Radio. News. Hello, Stephen here. It's been a year since we launched Here's Why. And in that time, we've brought you stories from around the world about the global economy and how it's changing. To mark our first birthday, we wanted to bring you one of our favourite episodes with our global economics reporter, Enda Curran. I'll be back next week with a brand new episode. In the meantime, enjoy.

I'm Stephen Carroll and this is Here's Why, where we take one news story and explain it in just a few minutes with our experts here at Bloomberg. It's the lifeblood of the finance world, the numbers that tell us about the state of the economy. The August data was, at least for the manufacturing PMI, it was disappointing. Flash PMI survey data for June signals a slowing pace of economic growth. The latest payrolls report coming in below estimates. US jobs data. New data. Data. Data. Data. Data. Data.

There's a deluge of data available for major economies, but to misquote George Orwell, some data is more equal than others. Think about the many different ways that we measure inflation or the labour market, job openings, job creation, unemployment, all tell you something different. And everything from economic growth to purchasing manager index surveys can get significantly revised between the first and last versions. So here's why some economic data matters more than others.

I'll also tell you how to separate the signal from the noise. Joining me now is our global economy reporter, Enda Curran. Enda, great to have you with us. You're a man who knows your numbers. There's always this question of when we get data, whether it's telling us what was happening in the past or what's happening right now, or giving us a hint as to what's going to potentially happen in the future.

Yeah, so some of the numbers we get are very backward looking. Like, for example, when you hear people talking about GDP data on the news headlines, that's typically telling you where the economy was maybe a quarter ago. So in economic terms, that's kind of ancient history. Conditions can change quickly. Economists like to talk about what they call high frequency indicators, data points that

give a more timely read on what's happening. And there, for example, you might look at retail sales, retail spending on Main Street. That's a good indicator of consumer confidence. You might keep an eye also on what's going on with borrowing, financing from banks. If banks are lending lots of money, that suggests that there is animal spirits and a willingness to invest out there by corporates and maybe for

Would we homeowners buy a home? That's a good signal. If they're not lending money, then it suggests that perhaps things are more subdued than you might have expected. So some of the numbers, as you say, can be quite backward looking. It's better just to treat them as such. If you want a timely read, keep an eye on the more high frequency indicators. Yeah, I mean, animal spares, depending on what kind of animal you're thinking about, I suppose, tells you different things about it. How do we explain the contradictions that we sometimes see in the numbers? Sometimes they don't make so much sense automatically.

lining up one against another, if we think about an example of maybe inflation. So over the past few years, if you want to talk about the advanced economy world, there's been the worst outbreak of inflation in decades that impacted everyone's living standards. We saw interest rates go up and the cost of a mortgage and a loan go through the roof as a result. Now we're in a phase whereby disinflation is well entrenched. So the pace of inflation has slowed dramatically in many economies coming back to the area where central banks like it to be.

That's a good news story. But if you walk into the shop, having heard it on the news headlines, you're still paying much higher prices than you were only a couple of years ago. So think, say, in the US, for example, basket of groceries, maybe 20% higher.

than what they were before the inflation crisis struck out. And that's where you get into the difference between the rate of inflation, which is what the economists measure every month, versus the actual price level that you're paying in the store. And I think there is a disconnect and confusion there. People hear inflation's coming off, that does mean prices are coming down. Now,

To be clear, for prices to come down, that would need deflation. And when an economy is in deflation, it typically suggests it has some real problems going on. So, it's a tricky one at the moment. It's a tough pill for households to swallow. We're at a point where inflation is slow. But for prices to start falling, that would require something of a deeper shock to the economy. Yeah, and indeed, most of the conversations that you'll have with people will be about how expensive things are consistently rather than necessarily how much they've...

gone up by. Another quirk that we follow very closely here at Bloomberg is data revision. So we get sometimes several iterations of the same number.

Why do we see sometimes very big revisions in the data? It's mostly because, as I say, a lot of these readings are snapshots in time. They are incomplete. It might be on a monthly basis or maybe a quarterly basis. And as the months of the year goes by and maybe after another year or so...

the kind of agencies who tally this, the statistic agencies and the government economic agencies, pull all the numbers together when they have a more complete picture. And that's when they are able to say, oh, we overstated something there or we underestimated something there. And they make changes to what were previously announced. So, for example, the U.S. employment data, and this is true of employment data anywhere, can be subject to material revisions. We've just had recent revisions to U.S. jobs data, which suggests there were 800,000 less jobs

than originally counted in the system. That speaks to a weaker labour market than was broadly expected. Now, the jobs market is still OK in the US, but it goes to show you that revisions can have a material impact. Yeah, and look, it also speaks to the idea of getting the right data and data that is accurate. And revisions, I suppose, get us closer to what is a better picture.

of what's going on in something like the jobs market as well. There's an old joke about you put 10 economists in a room and you get 11 opinions. How much can numbers be open to interpretation? There is a degree of interpretation because it could suit someone's investment thesis. They will want to read numbers whatever way it is to back the argument they're making. Numbers can be interpreted to meet somebody's political bias or political outlook.

for example so when we had the recent interest rate cut in the US for example you had one side of politics here saying it shows that the inflation story is under control and the Fed is at a point where it can bring down interest rates that's good for cost of living but of course you had the other side of the political divide here making the point that interest rates are coming down because the economy is losing jobs and the jobs market is weakening so it

Everything can be interpreted in different ways, but ultimately one of the good things about economics is the numbers and the data and the statistics do not lie. So if you're looking for the most quality data or the best things to look out for when you're trying to assess numbers as they're being published, what are the sort of things that you think about when you're trying to parse what a certain number means for the economy? You have to look for the numbers that really speak to what's happening in both people's lives and in companies' lives. So that would be figures around numbers

corporate investment, business investment, what's happening there with companies? Have they got the confidence to go out and expand and hire new staff? Then obviously, you have to keep an eye on what's happening with household credit. Are people taking out mortgages to buy a house? Are those who have a mortgage taking out a loan to renovate the house? That speaks to, of course, confidence in terms of consumer confidence of those all around us. And then, of course, you have the

the very timely monthly or even quarterly readings in terms of inflation, what is going on with the price that we're paying for goods and services. I mentioned the jobs that earlier. That's obviously a very critical one. And then all of that creates the jigsaw that is known as the GDP jigsaw. That's backward looking, but it's a health check and it tells you where the economy has been. Andy, you've covered economies all over the world for Bloomberg. I wonder, do you have a favourite piece of data? Is there one that still you get excited about trying to read into the details of?

Well, I used to get excited about there was a phase when satellite data on China was a big thing, especially among hedge funds. It was popular that someone had the latest satellite footage of some industrial expansion or development somewhere, maybe some housing property site being developed. And they were claiming that they were getting an early read on what's happening in China's economy. But I think we've passed that phase now. During the pandemic, there was a huge rush of

on high frequency indicators. So, people wanted to know what's happening with cinema tickets and what's happening with eating out and what's happening with... Sammages from press. I remember that one. All of this and usage of the subways. And in truth, we're back to where we started. We're looking at the official data that comes out of the agencies and people are keeping an eye on, as I mentioned earlier, spending data, keeping an eye on lending data, jobs data, inflation data. I think the satellites and sandwich indexes were all very interesting, but we've come back to what we know and trust most.

We've returned to the classics. Enda Curran, our global economy reporter, thanks very much for joining us. For more explanations like this from our team of 2,700 journalists and analysts around the world, search for Quick Take on the Bloomberg website or Bloomberg Business app. I'm Stephen Carroll. This is Here's Why. I'll be back next week with more. Thanks for listening. This is an iHeart podcast.