Citi Economic Surprises
Citi Economic Surprises is a long-standing series published by Citi’s FX research department to gauge whether the economy is “beating expectations” of economic forecasters - this is very much the concept of a company beating analyst expectations, applied to a whole economy.
Improving economic growth is generally better for company earnings, while a slowing economic growth can hinder company earnings, as shown by a lot of Q4 2021 earnings calls with the current market environment.
Several economic indicators are included in the basket and the weights are based on the impact that economic surprises have on FX crosses.
Economic surprises are meant to be used mostly in FX trading, but most investors use them to gauge whether the economy is on an uptrend or downtrend for broader economic allocation.
Stronger-than-expected economic growth is generally better for company earnings (although it depends on the exact nature of the business). However, when accompanied by rising interest rates it can temper a bullish market sentiment.
On the other hand, weaker-than-expected economic growth is generally bad for company earnings (again, dependent on the exact nature of the business). However, when accompanied by declining interest rates it can temper a bearish market sentiment.