When Good Economic News Goes Bad

Similarly, ECRI's future inflation gauge is edging down, an indication that the Fed won't feel compelled to take action on that front by boosting rates.

Other recently released indicators pointing to a stronger 2007 include the Conference Board's index of consumer confidence, rising to its highest level since April, and a report from the National Association of Purchasing Management showing an increase in business activity in the Midwest.

Meanwhile, the December Economic Letter from the Reserve Bank of Dallas argues against making sweeping conclusions on thin economic data. "Many early economic statistical releases are inaccurate," warns Evan F. Koenig, vice president and senior economist at the Federal Reserve. "Scores of analysts use the government's initial estimates in their forecasts, which can lead to trouble."

Koenig notes that many government economic studies are based on surveys that are refined and updated as new responses are tallied and old ones corrected. "Seriously misleading conclusions and subpar forecasting results are likely when analysts and policymakers treat heavily revised and first-release data as if they are interchangeable," Koenig says.

And that makes it even more imperative for investors to take a deep breath before reacting to the latest scary headline about the economy.