For months, economies across Asia and Europe have been stalling. Chinese factories are gearing down, Japan is just limping out of recession and the eurozone has caught a nasty case of deflation.
By contrast, America's economy has seemed impervious, with growth chugging along nicely as the job market continued to tighten -- until now. New data suggest that U.S. is also slowing down.
The Citigroup Economic Surprise Index, shown below, measures incoming economic data against analyst forecasts. Better-than-expected results push the index higher; while weaker-than-expected data moves it lower. After peaking late last year, the index has collapsed rapidly back to early 2014 lows as a variety of data points -- from factory orders to retail sales and consumer confidence -- have missed to the downside.
What's troubling for stocks, which pushed to new record highs on Friday, is that the Citigroup Economic Surprise Index and the S&P 500 usually move in unison. The relationship broke down somewhat starting in late 2012, coinciding with the start of a deluge of cheap-money stimulus from the major central banks.
But with the Federal Reserve set to raise rates later this year, and the Bank of Japan worrying about the side effects of its stimulus measures, the relationship could very well realign.
Other signs suggest the recovery is starting to tire. The Economic Cycle Research Institute -- which maintains its forward looking Weekly Leading Index, a gauge has shown an eerie ability to divine what lies ahead -- has fallen to levels not seen in three years . And outside of the current economic expansion, that level has only been seen seven other times since the 1970s -- six of these marked the start of recessions.
If all of this is surprising, you're not alone. Last week, Dallas Federal Reserve President Richard Fisher admitted that "he's perplexed" by the soft January retail sales report. Overall sales dropped 0.8 percent, a sharper fall than the 0.5 percent decline experts had predicted.
Even after removing gasoline sales, along with autos, building materials and food services, so-called "core" retail sales were basically flat. This is hardly the uptick many were expecting from lower energy prices.
What's more, this is coming at a time of strength in both the job market and the stock market. Both of those trends should be boosting consumer confidence and incomes, translating into higher household spending.
The latest data from government statisticians show job openings at their highest level since 2001. Within January's payroll report data, Société Générale economist Brian Jones noted that average hourly earnings increased to 2.2 percent on a year-over-year basis. He called it, "a wage increase worth waiting for."
Despite that seemingly good news, the latest University of Michigan Consumer Sentiment survey showed a big pullback this month from January's 11-year high (albeit, still at a level that matches the second best reading of the last eight years).
One possible explanation is that the drop in energy prices and specter of higher labor costs has businesses worried about higher costs and tighter profit margins. As a result, investment spending plans -- especially in the energy sector -- are already coming down fast. Households, burned by a number of false economic dawns since the recession ended, are playing it safe even as they see some improvement via higher incomes and a lower cost of living.
If so, then we need to hope that the tailwinds for consumers continue to build, even as businesses feel the heat, to generate a lift to the second half of the year. Otherwise, should the Citigroup Economic Surprise Index continue to fall, stocks will have a hard time staying aloft.