Currently, those wanting to see real-time trends in economic data turn to the Citi Economic Surprise Index. Many strategists use it because it is the only tool, until the Lantern Daily Economic Index (LDEI), to track real-time aggregate economic data. In the latest FOMC meeting minutes, the Fed revealed that they monitor real-time economic data through a surprise index by attributing the recent rise in interest rates to “stronger than expected data releases” rather than just stronger economic data.

The Citi index measures the difference between where economists expect an indicator to be (via averages of surveys) versus where the indicator is released. It goes up when economic data is “surprising” to the upside and vice-versa, goes down when surprising to the downside. Perhaps surprisingly, the Citi index and Treasury yields aren’t correlated. Versus the 2-year Treasury yield, it has a correlation coefficient of +0.01, and versus the 10-year, it has a correlation coefficient of -0.06. The LDEI, however, is positively correlated to the 2-year at +0.33 and the 10-year at +0.19. Also, the Citi index doesn’t show any greater magnitude during recessionary or overheating economic climates because economists’ expectations shift up or down respectively. The chart below walks through some crucial differences between the LDEI and Citi Economic Surprise Index which show that the LDEI is a more reliable and meaningful way to track real-time economic data.

Click on the chart for a bigger version.