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Investing Specialists

Don't See Doom in Every Data Point

It's far too early in the recovery to panic over a month or two of sloppy economic data.

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Recently, I have been fuming at my desk as each new economic indicator--especially the negative ones--is viewed as "brand new evidence" of a faltering economy. In fact, many of these down indicators are not particularly surprising or game-changing, and they were relatively foreseeable, reflecting factors that have been identified and known for a while now.

For example, a couple of weeks ago I explained how the expiration of the housing credit in April is likely to ripple through various housing indicators all the way through September. Pending home sales data have already probably taken their worst hit, while some of the price-related impacts of the expiring credit will manifest themselves this fall.

This week, interpretation of the retail sales data was the object of my ire. Yes, the headline retail sales report was down 0.5%, but excluding autos and gasoline, the figure was up a touch. Poor auto sales, announced on the first of the month (lack of incentives and a big March surge), and falling gas prices (the retail sales report is not adjusted for price changes) were already well-known. Meanwhile, almost every other retail category was up.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.