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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.


Fisher Investments

) -- It's no secret that economic sentiment is low. Consumer and business confidence surveys have deteriorated worldwide for months. Headlines bemoan an economy on the brink, and some say recession is here already. Yet simultaneously, the balance of economic data has consistently

outstripped expectations, registered continued growth and painted a vastly different picture than many might think.

Take U.S. retail sales. The Conference Board's Consumer Confidence and the U-Michigan Consumer Sentiment gauges show pessimism pervaded in 2011. Some believe consumer sentiment is predictive of actual spending behavior. But watch what shoppers do, not what they say. Because all the while, though consumer sentiment has been weak, retail sales have climbed.

Moreover, while many bemoan either a dead, dying or ill American consumer, the fact is retail sales are at a record high.

A similar trend played out in European industry, which outstripped expectations in August -- while the German IFO Business Confidence Index fell. Eurozone industrial production (IP) rose 1.2% month over month (5.3% year over year) versus the consensus forecast of a -0.8% month-over-month decline (2.1% annual growth). Italy, Germany, France and Spain beat expectations. Exhibit 3 plots Eurozone and country-specific IP since 2005, showing strong growth since recessionary lows.

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The UK's IP also beat expectations, growing 0.2% month over month in August while forecasters predicted a -0.2% pullback. And Japanese machine orders surged: 11% month over month in August vs. an expected 3.9% increase. Foreign orders -- a key global leading indicator -- grew a whopping 32% month over month, showing global demand remains buoyant. Foreign tool orders grew 16% month over month in September, suggesting demand remains firm.

Finally, U.S. business inventories showed

unappreciated underlying strength. As shown in Exhibits 4 and 5, inventories' and shipments' (sales) annual growth rates hit new highs, while the inventory-to-sales ratio remains near all-time lows. Put another way, firms' stockpiles are low, meaning even an incremental demand uptick should work through the supply chain fairly quickly, spurring additional production.

True, economic data earlier in 2011 showed deceleration. But no matter how you slice it, growth is growth, and growth isn't recession. Economic growth has always been variable and volatile, and it seems increasingly likely the slowdown earlier this year was a soft patch -- not a recession. Recent results speak to improving, not worsening, growth rates. It's always possible a recession lies further ahead, but few signs of it exist now.

For stocks, it isn't impossible a lasting downturn occurs without a recession, but such occurrences are rare in history, meaning the likelihood of a big down scenario from here (barring some enormous and yet-unforeseen negative surprise) seems small.

When assessing economic data, it's important to assess what reality is, but also the perception. The gap between what reality actually is (like rising retail sales) and the perception (falling consumer sentiment) is important for stocks. The more negative the perception of a positive reality, the better for markets, as positive surprise is then easier to obtain.

It seems likely to us a choppy 2011 (with a very challenging third quarter) ends with full-year broad market returns being either slightly up or slightly down. But the gyrations along the way have shifted prevailing sentiment far to the negative -- an excellent backdrop for stocks moving forward.

(This article constitutes the views, opinions, analyses and commentary of Fisher Investments as of October 2011 and should not be regarded as personal investment advice. No assurances are made Fisher Investments will continue to hold these views, which may change at any time without notice. In addition, no assurances are made regarding the accuracy of any forecast made herein. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.)

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.