"It Fell Off A Cliff": Morgan Stanley's Macro Indicator Just Crashed The Most Since Dec. 2008

Tyler Durden's picture

Step aside Citi US Economic Surprise Index, which after a "surprising" streak of negative economic data, recently crashed to the lowest level since October 2016...


... and make way for Morgan Stanley's ARIA, a monthly US macro indicator based on data collected through primary research on key US sectors (consumer, autos, housing, employment, and business investment).

The reason why this particular index will likely feature prominently in financial commentary in the coming days and weeks, is that as Morgan Stanley's chief economist Ellen Zentner writes, "ARIA appears to have fallen off a cliff in April, with a 0.72% decline, the largest since December 2008."

As Zentner expains, weakness was led by sharp declines in the investment and housing components, although even as the bank's data on business and residential investment was weaker, the consumer, employment, and autos components posted modest to moderate gains in April.

What was the main driver for the collapse: "Business formations were this month's biggest drag, as they looked to have reversed an earlier post-election surge. If not for that, ARIA would have come in slightly positive in April at +0.13%."

Some more observations from MS:

ARIA’s investment component made the largest negative contribution to ARIA in April (Exhibit 4), as our business formations tracker (MSBIZ) fell 11%M, the largest one-month decline in the history of our index, after a 0.2%M increase in March and a 12.7%M increase in February. The weaker trend in business formations in our data this month appears out-of-sync with small business sentiment (Exhibit 2), and suggests that small business sentiment may be set for a correction.

Still, the bank concedes that this is a sizeable miss compared with what its current quarter growth tracking suggests, with the discprenacy shown in the chart below. In fact, if the ARIA is accurate, Q2 GDP will likely print in the sub-1% range.

Earlier on Sunday, Morgan Stanley's co-head of economics noted this collapse and warned that "if US growth failed to gain momentum in 2Q, this would likely rattle markets. A plunge in our real-time big-data activity indicator in the US, ARIA, hints at a possible softening in 2Q GDP tracking estimates. Such softening could challenge the conjecture that the gap between soft surveys and hard data will be closed by the subdued hard data converging to elevated sentiment levels."

As for Zentner, her takeaways are two-fold:

  • (1) ARIA suggests that the bank's 2Q GDP tracking will soften over the coming weeks from its current level of 3.9%,
  • (2) This could be another temporary disconnect between ARIA and GDP as happened in mid-2014 and mid-2016 when ARIA softened yet reported GDP growth remained robust.

Conveniently, if it ends up being the former, Wall Street economists now have the first "global ranswomware attack" scapegoat excuse to explain why for yet another quarter, US GDP growth is simply not there.

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LostandFound's picture

Iceberg dead ahead !

espirit's picture


But I just booked my summer vacation!


38BWD22's picture



Bearing Guy sez:

All travelers, starting NOW, should take along plenty of CA$H, some small gold coins and maybe Bitcoin with them, just in case the credit cards stop working suddenly.........

Winston Churchill's picture

I'll add, small denomination bills,unless you want to pay $100 for everything.

I always keep a couple of thousand in 1s,5s and 10s in the safe.

espirit's picture


Wise advice from the Oracle of Bearings.


ReasonForLife's picture

This is not a good time to travel unless absolutely necessary.

Winston Churchill's picture

ATC computers may be infected, and who know how many others are as well,but the affected companies are trying

to avoid bad PR by admitting it..

Raffie's picture

Clearly ZH editors have some charts upside down.

Everything is fine as we enter the GOLDEN AGE of MAD MONEY.

I will blind fold myself, pick a randon stawk, toss in $1 and pull out $1mil..... Good times.



rmopf2010's picture

LMFAO nice writen!

casino where everyone wins yeahhhhh

many thanks to CB cartel

SoilMyselfRotten's picture

Except PM holders, those damn (anarchist/terrorist) bastards

Offthebeach's picture

Now is a good time to buy.


 NA Realtors. 


VD's picture

do our trades and take vacation as macro collapses and we take the other side of our advice to you dear muppet; oh, and have a great vacay!

GoldRulesPaperDrools's picture

Get back into those gun stocks while they're cheap!!! ;)


JackT's picture

Won't matter if the global system can't start on monday due to wannacry

espirit's picture


It ought to be Monday somewhere in the world real soon.


JackT's picture

True. I wonder if it started?

Raffie's picture

Demonize Bitcoin because the USD has never been used for something like this ever in history.

BAD BITCOIN hides the true criminals unlike the USD.

DontWorry's picture

but they didn't have the printers set to 11 on Dec 08

Harry Lightning's picture

Note the extremely poor correlation with respect to GDP magnitude provided by the ARIA relative to actual GDP reporting.

MD's picture

Plus there are a few data points where ARIA is negative, and GDP is strongly positive. Take a look at early 2014, for example.

Harry Lightning's picture

Exactly. Which is why I give little to no credence in this ARIA data as a primary piece of evidence that the economy may be changing trend.

Vlad the Inhaler's picture

Um note that it's a leading indicator, so for example when you see that negative print in 2014 then GDP goes down later.

ms8173's picture

Why don't those charts ever match up at some point?  They never have zerohedge!!!!

wmbz's picture

"the consumer, employment, and autos components posted modest to moderate gains in April".

Here in central S. Carolina the outlet malls and shitty eating chain stores are always packed. Of course we do have more that our fair share of fat asses, and I mean fat, waddling around from place to place packing their fat faces full.

Arnold's picture

"...the gap between soft surveys and hard data will be closed by the subdued hard data converging to elevated sentiment levels." "

I've seen this thought before.
I read it in the New England Journal of the Insane.

Cloud9.5's picture

If the lights are going out please let him go out this weekend before I go to California next week

Arnold's picture

Always have your escape route planned.
Situational awareness, sounds like you've got it.

south40_dreams's picture

It's different this time

moorewasthebestbond's picture

Bye bye Bitcoin.


Hello President Pence.

Fundies's picture

Yes fallen off a cliff,  but bungy chord is firmly attached. 

Magooo's picture

BIG FUCKING DEAL... So fucking what...


The central banks will just pump out more stimulus and turn this around again ---  and again --- and again.


Stop crying wolf.   Wake me up when the wolf starts to kill the chickens