The Economy's Surprises

With all the signs in recent weeks that our economy has been gaining strength, it might just be the case that economists are missing the boat and underestimating our recent growth. A metric called the Citigroup Economic Surprise Index, which measures the distance between economists' expectations and the actual economic statistics,  is now at its highest level in nine months. 

The biggest reasons the economy has exceeded expectations recently:

* The unemployment rate dropped rather suddenly, to 8.6 percent, in part because of revisions to the number of jobs that were added in previous months.

* Economists undershot the recent gains in the Institute for Supply Management's factory index, which estimates the growth of the nation's industrial output.

* The holiday retail shopping season has been somewhat stronger than expected.

None of this makes the economy any stronger in reality, but corporations make decisions based on economic forecasts. If the economy was able to post its recent gains based on an unduly pessimistic outlook, it may grow even more strongly once people recognize how solid things are.