Economists have never underestimated the US as much as they are right now

A look at the Citi economic surprise index

You look to economists for signs of what the economy is going to do next. It’s their job. Yet it’s been shocking how much they underestimated the reopening of the economy and the rebound in economic data.

In the PMIs it’s been particularly stark. We saw it yesterday in the ISM non-manufacturing survey way above expectations. What’s annoying about it is that it’s been happening for weeks and economists haven’t adjusted. The PMIs measure the change from month-to-month so a rise should have been no real surprise. Given the lack of a market reaction, it’s increasingly clear that market participants have sorted it out.

The Citi economic surprise index measures how data has done relative to economist expectations and it’s several orders of magnitude above all-time highs.

It’s been a dismal effort that shows a stunning lack of creativity in a field that’s repeatedly maligned for inside-the-box thinking.

Does that chart give you any confidence on economists forecasting what happens next? It certainly doesn’t for me. We’re on our own here.

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