Daily update
Daily update
- Today’s calendar is plagued with business sentiment survey opinion, and little else. Surveys attract media attention because if you assume the survey does what it says it does, it can produce a more dramatic story. However, survey evidence has been a progressively less reliable description of reality across various measures. The UK government’s ONS says its labor force survey is unreliable—why would sentiment surveys of employment be more credible?
- It is easier to answer a survey with perception rather than reality (reality requires thought). This helps explain why consumer surveys report more inflation than exists—US vending machine inflation is over 13% y/y, distorting inflation perceptions (falling television prices leave perceptions unaltered).
- If survey response rates fall, people who fill in surveys are more likely to be strange. What motivates the dwindling numbers of respondents to fill in surveys? Loss aversion, in a different form. Bad news is more powerful than good news, so those who want to complain have an incentive to fill in a survey. This helps account for survey evidence tending to under-report economic activity.
- Surveys also matter to investors’ political perceptions. In a year where politics matters, the unreliability of survey evidence in a more polarized landscape presents a challenge.
