Just when you thought Wall Street's best paid, yet worst weatherman [4]couldn't come up with any more gut-busting, roaring humor, he unleashes what is surely today's biggest financial trollery.
Similar to last year, Q1 real GDP growth has been revised into negative territory. The preliminary reading on inflation-adjusted output now shows a -0.7% decline compared to an initially-reported gain of +0.2%. While harsh winter weather, disruptions related to the West Coast port labor dispute, dollar strength and a plunge in energy-related capital spending certainly weighed heavily on Q1 output this year, weakness in first-quarter GDP growth has increasingly become the norm. Recent research by the San Francisco Fed shows that the trend of weak Q1 output growth over the past several years can be largely explained by residual seasonality in the seasonally-adjusted GDP data. Our calculations along the same lines suggest that applying an additional seasonal adjustment to the BEA’s data results in Q1 real GDP growth of 1.2%. We find that the effect of residual seasonality on GDP estimates has been increasing sharply for over a decade. Of the four major components of GDP, all but one are meaningfully impacted by residual seasonality. For these reasons, the drop-off in estimated Q1 GDP growth has not altered our view that the underlying fundamentals of the economy remain on firm footing.
This, of course, coming from the guy who two months ago originally "predicted" today's single-seasonally adjusted -0.7% GDP was actually 3.1%
Following weaker than expected retail sales, inventories and housing starts, we marked down our estimate of Q1 #GDP [5] from 3.1% to 2.4%
— Joseph A. LaVorgna (@Lavorgnanomics) March 17, 2015 [6]
Normally, we would respond to this idiocy, in which apparently a $100 billion build up in inventory to offset a 2% collapse in GDP due to a secular plunge in global trade [7]and a surge in the USD due to fears of an imminent rate hike, are seasonal but we are just too busy laughing.
