Ah Valentine’s Day. A day of aspiration, fluttering hearts, yearning and, inevitably, crushing disappointment for some.
But there are other similarities between economic news and the day on which we celebrate the Christian martyr St. Valentine. Firstly, things change. Sometimes drastically. With Valentines; people often send cards that swear never ending love to significant others that they sometimes have no desire to even see or speak to a month later. And economic data often gets revised, once the statisticians have had time to reflect and take on board more information, changing what we think or feel about our economy.
Similarly, things need to be seen in context. ALL the signs are important and deserve consideration. A Valentines card might state one’s unconditional love but it does not prove it. People need to look for evidence that vindicates what the card says in their significant other’s behaviour — a card says a lot more if it is complemented by a nice dinner and maybe a movie and the small stuff like the holding open of a door. Likewise, for economic information beyond the numbers in today’s headlines. What is the other data and evidence telling us? What are businesses saying about conditions — do they back-up the raw data?
Thirdly, sentiment and passions can get out of control. The feel-good factor from receiving that prized Valentine message — or the bruising impact of an empty mailbox on 14 February — can also get a bit out of hand. It’s just a card really. Nice to receive but doesn’t actually cost very much in terms of time and effort. Yet it makes someone (briefly) feel like they are the luckiest, or most unfortunate person, alive. A good or bad set of numbers really can lead commentators to get carried away and read too much into one set of data — they seem to forget that these are just a snapshot and there will be another set of numbers next month that might tell the same story or an entirely different story.
And, finally, people love to compare things — including themselves. At least for school kids, getting five Valentines card (as long as they are not from sociopaths) is better than receiving none. They signal popularity and indicate you are doing something right. So people compare their own Valentines bounty with that of others. Same with economic data of different economies and the vanity contest it fuels. How fast is the US growing compared to Europe? How does growth in China compare with that in India right now?
So, on this Valentine’s Day, I hope Cupid’s Arrow finds you in a way in which you want and I leave you with a variant on a classic poem:
The rose is red, the violet’s blue The money is green The economy grew
This post also appears on the Real Time Economics blog.