Economic Pessimism and the Economic Reports

The most recent durable goods report is taken as a confirmation of the slowdown ahead. Indeed:

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Highlighted with blue are the last three monthly changes in the value of total durable goods new orders. May and June have registered decreases.

However, if we take a look at the details we see that these decreases are mostly due to the non defense aircraft and parts component:

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Note that values for this sub-sector have high volatility from month to month. In April they increased by 215% for example, pulling the total value of durable goods orders up and inducing the feeling that April was a positive report when, in fact, as I remember it, it was not so good.

So, to avoid being mislead I look into detail at economic reports. For this one I look more attentively at non defense capital goods excluding aircraft:

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This is a good measure of business investment. This time June and May do not look so bad.

Nevertheless, the media has taken the opportunity to add this report to the evidence of a recession coming. I think pundits have become sure of this recession and do not abstain to mention it every time. I see titles in the media like: “What will car-makers do during the recession”, or magazine covers like:

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Note the expressions on people's faces.

This suggests the pessimism towards the economy is very high. While pessimism will be an important ingredient in the coming downturn, at this point, from a contrarian point of view, I would expect some positive surprises in the economic data. The surprises seem to have started with the new home sales and they could continue with the GDP report on Friday.