The Economic Surprise Index Has Fallen To Zero

Citi's Economic Surprise Index, a measure that tracks actual economic data relative to consensus estimates of market economists, has fallen to zero following a string of weaker-than-expected data releases driven by a slowdown in economic activity in December and January.

The last time the index was this low was at the end of October, in the wake of the government shutdown. At the time, economists revised down estimates for Q4 data points to reflect the likely effect the shutdown would have on economic activity.

When the subsequent weakness never materialized, the newly-revised estimates were easy to beat, leading to a surge in the index to multi-year highs.

Over the past month, however, the index has fallen swiftly from its Jan. 15 peak. December and January data points have been weaker than expected - in part due to unseasonably harsh winter weather.

Given the spate of winter storms that have continued into February, many market economists are telling clients that they won't be able to get a "clean" read on the near-term direction of the economy until April, when March data points are released.

However, we could be close to a bottom in economic activity relative to expectations for now as economists incorporate new information into their forecasts.