It's quite interesting that the US Bloomberg ECO Surprise Index is currently at its lowest level since 2016. See Figure 1.
The economic surprise index measures economic data coming in above or below consensus (median) estimates. Figure 2 also shows a narrower variant of the “Economic Growth” index, which has also fallen significantly recently!
In other words, in the last two months, analysts have been most negatively surprised by data (below their own forecasts) since 2016! See Figure 3.
Figure 4 also presents an inflation surprise index.
Surprise indices may in some periods correlate well with the overall condition of the economy, or even have leading properties (but this certainly does not apply to the entire period). Do the last 2 months of significant decline indicate a weaker macro and upcoming interest rate cuts? This definitely must be taken into account.
Figure 5 shows the surprise indexes against the Fed Funds Rate and 10y UST yield. Currently, we have a situation somewhat similar to 2018/2019, when surprise indices led interest rate cuts by the FED, as well as falling 10Y yields.
Figure 6 shows index of inflation surprises against the annual change in CPI. The surprise index seems to be ahead of inflation changes... and the last decline in the index in June 2024 is mainly due to the release of surprisingly and unexpectedly soft CPI and PPI for May.
