Softand hard economic data are back in the news as trade policy changes. Soft data, such as surveys, measures sentiment, expectations, intentions, and howrespondents feel about the economy. In contrast, hard data measures actualresults and activity, such as production, spending, and job growth. While they typically move together, there are periods of heightened uncertainty where theycan diverge, such as today. This month’s chart focuses on the difference between soft and hard economic data and discusses how to interpret their recent divergence.

Figure1 ranks ten soft economic indicators as a percentile relative to the past five years.

The yellow bar shows the average soft dataset ranks in the 27thpercentile, highlighting broad-based weakness in sentiment and expectations.

Startingat the bottom, consumer sentiment and CEO confidence surveys rank in the 0percentile, reflecting increased uncertainty. In the housing market, buildersentiment is weak as high mortgage rates and home prices weigh on home demand. Furtherup the list, the Dallas and New York Fed surveys reinforce the cautiousbusiness outlook. The Philadelphia Fed survey at the top appears notably lessoptimistic than the other two surveys, but it’s important to note that thePhiladelphia survey was conducted in early May, after the 90-day tariff pausewas announced. The divergence is a good example of how quickly soft data canchange in response to new information. Bank lending standards and smallbusiness optimism are also near the top and appear to be outliers, but that isbecause they have both recovered from weaker periods in 2022-2023, when the Fedwas raising interest rates.

Incontrast, Figure 2 tells a more optimistic story based on ten hard economicindicators. The yellow bar shows an average rank in the 78th percentile,signaling continued economic growth. At the top, company payrolls, banklending, and consumer spending all rank in the 100th percentile, reflectingsteady job growth, active credit markets, and solid consumer spending.

Manufacturingand industrial data, along with construction activity, are also strong, withdurable goods orders and shipments and construction spending all in the 98thpercentile. Moving toward the bottom, we start to see areas of softness. Jobless claims rank in the 51st percentile, with unemploymentclaims still low but rising. In the housing market, building permits andhousing starts show the pace of activity continues to slow from pandemic highs.

The data tells a mixed story: soft data indicates sentiment iscautious, while hard data shows actual economic activity remains solid. Bothtypes of data are valuable, but it’s important to understand their uses andlimitations. Soft data can influence sentiment and behavior, but hard dataultimately drives corporate earnings and economic growth. Soft data is likenext week’s weather forecast. It gives you a sense of what to expect, but it’snot always accurate. Hard data is like looking out the window. It tells youwhat’s happening now. Given how quickly conditions are changing, our team is trackingboth datasets to keep a clear view of the economy.

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