According to analysts at TD Securities, for the US economy, residual seasonality continues to be a lingering factor in first and second quarter GDP data.

Key Quotes

“Despite a recent effort by the Bureau of Economic Analysis aimed at addressing this shortcoming, studies suggest seasonality effects are still persistent in the seasonally-adjusted growth figures.”

“According to recent research by the Federal Reserve Bank of Cleveland, residual seasonality reduces GDP growth in the first quarter by -0.6pp on average, while it boosts the second quarter by 0.5pp. These results largely match what has been evident in the data in recent years.”

“This pattern suggests some lingering residual seasonality could affect the upcoming release of Q1 GDP data (out on 26 April). Nowcast estimates suggest Q1 GDP growth might exceed 2%, despite a number of uncertainties at the beginning of the year. We forecast GDP growth to print 2.3% in Q1.”

“If this forecast holds, then Q2 GDP growth might not be as strong as some market participants have been expecting, given a negative relationship between quarters. However, we could well end up with more of a "goldilocks" scenario in which GDP grows at or above potential in both quarters.”

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