US: Don’t blame all of the weakness in Q1 GDP on residual seasonality – Nomura

Analysts at Nomura explain that the weakness in US Q1 spending data stand in contrast to the elevated levels in sentiment surveys and the 178k average gain per month in nonfarm payrolls.

Key Quotes

“Some, including the FOMC, have discounted the weakness in spending data because of “residual seasonality” and other technical reasons.”

“However, in 2015, BEA began addressing residual seasonality. Supporting the notion that much of the residual seasonality issue has been largely addressed, we find that the components within GDP that have been identified as primary contributors to top-line residual seasonality boosted growth in 2016Q1 and are contributors to growth in our tracking estimates of Q1 2017.”

“The implications are that the weakness in Q1 spending should not be entirely discounted, as some have done, and that a rebound in Q2 for “technical” reasons should be viewed with some caution.”