Is it foolhardy to trust the soft data?

The message from survey evidence that activity in the euro-zone has picked up substantially since the end of last year has yet to be fully reflected in the official data. Indeed, quarterly growth of 0.5% in Q1 was weaker than the rate implied by the Composite PMI. While the PMI has picked up further since then, should we take its positive message with a large dose of scepticism? The historical record favours the surveys. In fact, since 2001, the previous three times that the PMI increased to close to its current level the gain in momentum was initially missed by the GDP data, which was only later revised up. As previous episodes when the PMI rose sharply have always coincided with stronger growth, there is good reason to think that growth genuinely is accelerating.