More Debate Over Those First-Quarter GDP Numbers
Economists at the San Francisco Fed, and the Federal Reserve Board’s own economists, are divided over whether first-quarter economic growth numbers present a true picture of the state of the economy, especially during a period of bad weather.
In a new paper released on Monday, the San Francisco Fed suggested the scant increase in first-quarter GDP was due to a failure to apply enough seasonal adjustment:
“The official estimate of real GDP growth for the first three months of 2015 was shockingly weak. However, such estimates in the past appear to have understated first-quarter growth fairly consistently, even though they are adjusted to try to account for seasonal patterns. Applying a second round of seasonal adjustment corrects this residual seasonality. After this correction, aggregate output grew much faster in the first quarter than reported,” according to the San Francisco Fed paper.
That contradicts a research note from the Fed last week that found “no firm evidence” of problems with seasonal adjustments, according to a Wall Street Journal report.
AIER Senior Research Fellow Bob Hughes said there’s no way to know whether the economy will rebound “until we get hard data. We think it will. There’s some signs of it in the data, but the data continues to be mixed. We have seen a few green shoots.”
