US economic data quality a worry, authorities not acting urgently enough, experts say- Reuters poll

A Reuters poll reveals that 89 of 100 top policy experts are concerned about the deteriorating quality of official U.S. economic data, citing declining survey participation and significant staff cuts, including an estimated 15% reduction at the Bureau of Labor Statistics (BLS). This degradation in data reliability, which has led the BLS to discontinue approximately 350 Producer Price Index components next month, is seen as a risk to accurate policymaking, including for the Federal Reserve, with most experts believing authorities are not addressing the issue with sufficient urgency.

Analysis

A Reuters poll of 100 top policy experts reveals a significant and widespread loss of confidence in the quality of official U.S. economic data, with 89% expressing concern. The primary drivers for this sentiment are declining survey participation rates and politically-motivated staff reductions at key statistical agencies, including an estimated 15% headcount decrease at the Bureau of Labor Statistics (BLS). This has tangible consequences, such as the imminent discontinuation of approximately 350 components of the Producer Price Index. Experts, including former BLS commissioners, warn this degradation introduces a high risk of undetected biases and errors in crucial economic reports. The overwhelming majority of respondents, over 80%, believe U.S. authorities are not addressing this systemic issue with sufficient urgency. Critically, over two-thirds of the experts fear that deteriorating data quality will directly impair the Federal Reserve's ability to formulate effective monetary policy, compounding existing concerns about its political independence.

Key Decisions for Investors

• Investors should prepare for heightened market volatility surrounding key economic data releases, as the declining reliability of official statistics increases the risk of forecast errors and less predictable Federal Reserve policy reactions.
• Quantitative and macro-focused funds must critically review their models' dependence on government statistics, particularly granular inflation data like the Producer Price Index, and consider incorporating alternative data sets or wider confidence intervals to mitigate model risk.
• It is now more crucial to supplement official economic reports with forward-looking corporate guidance, industry-specific channel checks, and other proprietary data sources to validate macro trends and anticipate policy shifts.