First quarter GDP came it at a very weak +0.5%.
Despite obvious weakness, that GDP estimate is likely overstated.
Moreover, hopes for a huge second quarter bounce are highly overrated.
Those are pretty bold statements so let’s consider the case.
Seasonal Adjustment Flashback
Dateline May 22, 2015: The Wall Street Journal reports First-Quarter Growth May Look Better After Upcoming Statistical Tweaks.
The Commerce Department on Friday said it is planning a series of steps to smooth out statistical quirks that may be affecting quarterly gross domestic product data.
The move could make first (and fourth) quarters of the year a little less bad and the rest of the year a little less good.
This year, a phenomenon known as residual seasonality became a hot topic of discussion in some economic circles after Commerce reported a paltry 0.2% rate of expansion for GDP in the first quarter of 2015. That wasn’t the only time the the economy opened on a bad note: Since 2010, first-quarter GDP has averaged a rate of 0.6%. For all other quarters, it’s 2.9%. The trend appears to hold up going even further back, though it may have become exaggerated since the latest recession.
First Quarter Analysis
Despite the fact that first quarter 2015 was genuinely impacted by weather, the BEA elected to revise its methodology, seasonally bumping up first and fourth quarter GDP estimates.
This winter was nowhere near as hash as last winter. If anything, this Winter was rather favorable, especially for home construction in the South and West. Yet, despite seasonal adjustment methodology revisions, GDP rose a mere 0.5%.
At best, the BEA methodology revisions subtract from second and third quarter GDP reports.
At worst, first quarter GDP was really negative and no bounce at all is coming.
If one believes in the middle ground, first half GDP will be barely positive.
For further discussion, please see Stagflation-Lite Coming Up? 1st Quarter GDP 0.5% as Consumer Spending Decelerates.
Mike “Mish” Shedlock
All Commerce Department data is blatantly corrupt. Better to track rail freight traffic, sales tax receipts, electric power consumption, credit card transactions, UPS deliveries, and applications for military enlistment.
The transportation indices are perhaps the best indicator of economic health. Freight, whether by land sea or air, is critically essential to a vibrant economy. Since 2008, with a few minor exceptions, the trend line for these indices has been in a downward spiral. This means that there has been no recovery, and we have been in perhaps the “Greatest Recession” with absolutely no relief in sight.
Tony Bennett said:
“That wasn’t the only time the the economy opened on a bad note: Since 2010, first-quarter GDP has averaged a rate of 0.6%. ”
One reason for weak Q1s is accelerated depreciation for business since The Recession. Business would spend at year’s end to take advantage (pulling forward spending that might occur the following year) … as the accelerated depreciation slated to end. But the following year Congress would reinstate for another year. The Lucy pulling the ball away threat finally ended last year when Congress made it permanent.
Tony Bennett said:
“At worst, first quarter GDP was really negative and no bounce at all is coming.”
yeah, well … here is an (top 2%er) “expert’s” take …..
Mark Zandi: “the economy is doing very well, ignore GDP.” .
make believe economy said:
overstated (massively) for the last 8 years! it’s basically just ropaganda at this point,besides spending more on gov’t, medicare , ebt/snap/,more gov’t is not real sustainable growth because big gov has to massively borrow , print or tax to drive that half a percent
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