Data Show Economy Is Booming. Wall Street Thinks Otherwise

Recent CPI and producer-price index reports both pointed to an unexpected increase in price pressures in Jan

- SAM GOLDFARB

Data suggesting the U.S. economy is too hot for comfort are getting a cool reception in some corners of Wall Street.

A handful of high-profile economic reports, covering the big topics of inflation, economic growth and the labor market, have leaned decidedly on the too-warm side. But many economists have minimized these surprises, pointing to other data that are less alarming and measurement challenges that are unique to the start of the year.

Such arguments have been eagerly accepted by investors who have been rooting for growth strong enough to avoid a recession but mild enough to allow the Federal Reserve to cut interest rates a seemingly narrow path, with inflation running above the Fed's 2% target.

While it isn't unusual for investors to look past reports contradicting a hopeful narrative, economists also often warn against overreacting to one round of often-volatile data, whether good or bad. The S&P 500 ended last week just 0.5% off a record high and investors continued to bet on rate cuts later this year.

"From a very big picture perspective, it's still looking good," said Brian Rose, senior U.S. economist at UBS Global Wealth Management.

Last week's consumer-price index (CPI) and producer-price index reports both pointed to an unexpected increase in price pressures in January following months of mostly cooling inflation.