That First-Quarter Slump
We enjoyed Justin Wolfers’ story today about recurring first-quarter economic slumps, featured in The Upshot today in The New York Times. The story resonates with some of our own research published last week, as we have been cautioning against reading too much into sluggish gross domestic product performance this winter.
Wolfers talks about how, despite seasonal adjustments, first quarter GDP has been weak in recent years, and then rebounds. This year, he notes, is no exception. There’s an interesting chart here showing that since the 1990’s, first-quarter GDP has been far behind the performance of the other quarters of the year.
Regarding seasonal adjustments, Wolfers writes: “If it’s done right, there should be no systematic difference between economic numbers for the first quarter and any other quarter. The problem here is that the seasonally adjusted G.D.P. growth numbers still show a seasonal pattern, in which the first quarter has been weaker than other quarters. Statisticians call this ‘residual seasonality.’”
In AIER’s Business Conditions Monthly, released last week, we noted a long list of economic indicators that are on an upbeat arc, including jobs, personal income, net worth, job openings and quits.
From the monthly report: “Over the first three months of 2015, data suggest that real GDP growth may have decelerated from the 2.2 percent annualized rate of the previous quarter – perhaps to 1.0 percent or less. However, gains in jobs, income, and wealth over the past year have helped push U.S. consumer sentiment higher. Should the historical relationship between consumer sentiment and spending hold, we would expect to see a rebound in purchasing over the next several months. This would support our view that the economy’s current weakness is temporary and that growth is likely to reaccelerate in the second quarter.”
