"Soft" data can be bare-knuckled. Investors learned this recently when a dismal University of Michigan Consumer Sentiment Index report helped put stocks on the run. Investors caught a break a few weeks later when April sentiment data topped expectations, though it remained historically weak.
The question is, how much should it matter?
The report's survey data is often called "soft" because it asks consumers and businesses how they feel, rather than measuring "hard" numbers like retail sales, home buying, corporate earnings, and initial jobless claims.
So far this year, much of the "hard" data hasn't been as dire as soft reports like consumer sentiment and the Conference Board Consumer Confidence Index®, though there's sometimes a lag. Retail sales, corporate earnings, weekly jobless claims, unemployment, and some recent housing data have held up relatively well, but a handful of hard data points like business spending might signal developing weakness.
Friday's May 2 April nonfarm payrolls report is expected to see a big drop in jobs growth from the 228,000 in March, according to analysts, reflecting trade policy and government job cuts. The Wall Street consensus for April jobs growth is 130,000, according to Briefing.com.
Surveys can sometimes pick up pending weakness in hard data. The University of Michigan Consumer Sentiment report interviews 900 to 1,000 people around the country each month, asking how they're doing financially, whether they think they'll be better or worse off in a year, how they feel about business conditions, and inflation expectations. The survey began in 1946 and recently transitioned from randomly dialing cell phone numbers to interviewing via web surveys with address-based sampling.
The surveys "have proven to be an accurate indicator of the future course of the national economy," the University of Michigan Surveys of Consumers site noted.
And even "hard" data can be misleading at times. For instance, retail sales fell sharply in January, but that likely reflected weather and California wildfires rather than consumer sentiment. And many of the first-quarter earnings reports have looked very solid, but they may reflect businesses and consumers buying ahead of time as they anticipate the start of a trade war.
One criticism of the consumer sentiment survey is that it can reflect partisan political differences among respondents. Administrators say they're aware that more positive views come from those whose favored party controls the White House.
In a report this month, however, they said that "the Surveys of Consumers continue to reach a nationally representative sample of Americans across the political spectrum," and that "since the 2025 presidential inauguration, sentiment and expectations have fallen broadly in parallel for consumers of all three political affiliations," meaning Democratic, Republican, and independent.
The final April report, released April 25, fell from the final March reading of 57 to 52.2, slightly above analysts' expectations. It's still down 32.4% from a year ago, and the deterioration was particularly strong for middle-income families. "Labor market expectations remain bleak," the report said. Year-ahead inflation expectations surged to 6.5% in April, the highest since 1981. The report didn't have a major impact on markets, but the final March report helped send major indexes down 2% on March 28.
Still, some debate how seriously to take the survey data. First, there's the political element, despite administrators' recent findings. Then there's the relatively small sample size, with around 1,000 people chosen out of hundreds of millions.
Also, any survey could reflect all kinds of things, from what the person ate for breakfast to whether they had an argument with their spouse that day. In other words, moods can affect numbers.
"With consumers, I always say, watch what they do, and not what they say," said Kathy Jones, chief fixed income strategist at Schwab.
Big-bank CEOs and American Express (AXP) said this month that consumers remain strong, but some consumer-oriented firms like Chipotle (CMG) and D.R. Horton (DHI) reported conservative spending patterns. Personal spending data, separate from retail sales, has also lagged and so has inflation, sometimes a sign of falling demand. More color could come this week when Visa (V), McDonald's (MCD), General Motors (GM), Apple (AAPL), Starbucks (SBUX), and Mastercard (MA) report.
The last thing to remember is that soft data has misled in the not-too-distant past.
"A couple of years ago, all of this sentiment data was telling you that we were going into recession," said Kevin Gordon, director, senior investment strategist at Schwab. "That was the soft data. The hard data was telling you that the economy was largely fine."
The economy continued growing and a recession didn't occur. This doesn't mean "soft data" can't be a firm indicator—only that it's not necessarily the last word.
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