Hard data, which capture measurable performance of the economy but are backward-looking. Soft data are typically based on sentiment and expectations but are often forward-looking. .The disconnect between the two at this moment is creating challenges and generating data confusion among market participants and Federal Reserve officials.

Even as households and firms turn increasingly pessimistic, the economic slowdown they fear hasn’t yet fully materialized in the hard data. Gloomy sentiments do not always translate into actual spending or investment pullbacks.

Advance estimate for the first quarter did show a contraction in the real GDP growth rate. However, the initial GDP growth rate estimate was significantly distorted by front-loading as importers raced to bring in foreign goods before Trump tariffs could fully take effect. As inventory adjustments take place in the second quarter, some of the first quarter distortions will dissipate.

Yet, concerns remain as to whether bringing forward auto and other consumer goods purchases will leave American households and businesses with a hangover in the second quarter that may tilt the economy towards a recession.

As the Trump administration’s haphazard implementation of a poorly designed tariff structure unsettles financial markets and generates a spike in economic policy uncertainty indices,........

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