Since the election, talking heads have crowed about improving economic data (macro- and micro-). However, what they have failed to mention is all of the improvements have been in 'soft' survey and sentiment data, not 'hard' economic figures; and now, judging from the plunge in Goldman Sachs Analyst Index, soft data is starting to lose faith rapidly.
The Goldman Sachs Analyst Index (GSAI) declined by 5.2pt to 51.5 in March, but remains above 50, a level we have found represents trend growth. Underlying components also edged lower, though the month-over-month decline in the headline index was primarily driven by declines in materials prices and sales and shipments indexes. Consistent with the February survey, analyst commentary remains optimistic about the pace of growth in business activity this year, but some sector analysts suggested a few potential headwinds remain.
We construct the headline GSAI using the following weights: 30% for new orders, 25% for sales/shipments, 20% for employment, 15% for materials prices, and 10% for inventories. These weights parallel the Institute for Supply Management’s pre-2008 practice, substituting our materials prices index for their supplier deliveries index. The GSAI includes service as well as manufacturing industries.
On balance, regional manufacturing and non-manufacturing surveys were softer in March.
The Philly Fed, Dallas Fed, and Empire State manufacturing surveys all declined after improvements in February.
Overall, survey or “soft” data have retraced a bit in March after increasing sharply over the prior few months, converging toward the trend in hard data that would suggest a more moderate pace of expansion.
The GSAI’s underlying components generally moved lower in March as well. The sales and shipments index declined by 7.6pt to 53.8, but still continues to indicate expansion. The exports component declined by 3.2pt to 58.3, following a 19.5pt gain in January. While the new orders index edged down by 2pt to 50.6, the inventories index weakened by a larger 7.1pt to 40.0.