June 10, 2025

QuickTakes

Betting On Bullish Hard Data,

Not Bearish Soft Data

In recent months, the “soft” economic data releases have been weak, while the “hard” data have been strong. The former includes surveys of consumers, small business owners, and purchasing managers. We've been betting on the resilience of the economy, as confirmed by the hard data. Stock investors seem to agree with our view.

The purchasing managers indexes for both manufacturing (M-PMI) and non-manufacturing (NM-PMI) remained weak through May. However, the M-PMI doesn't track the growth in real goods GDP as it did prior to the pandemic. The same can be said for NM-PMI and the growth in real GDP services. The growth of real GDP on a y/y basis remains solid (chart).

Measures of consumer confidence have also been depressed so far this year, especially the Consumer Sentiment Index (CSI). It remained so in May, while the Consumer Confidence Index rebounded smartly during the month. Meanwhile, consumer spending, which was depressed by colder than usual winter weather in January and February, bounced back solidly in March and April because the labor market remained robust.

Today's NFIB release, showing the results of the National Federation of Independent Business’s May survey of small business owners, reflected some improvement in their optimism even though the uncertainty index remained elevated (chart).

On balance, 25% of respondents expected better business conditions over the next six months (chart). That's a relatively high reading.

Also relatively high is the percentage of respondents with job openings (34%). The percentage increasing hiring over the next three months remained about average (chart).

The news on inflation is mixed, with 3,131 of respondents planning to raise their prices. The good news is that the CPI inflation rate has been falling and diverging with this series over the past year (chart).

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