It seems that gravity still exists on earth! And yes, in the northern hemisphere, it still sometimes snows in winter (aren’t data’s “seasonally adjusted” after all?).
Apparently those two “strange” phenomena came as a big surprise for both mainstream economists and the FED itself.
Expectations of GDP growth for the first quarter of 2015 stood at 2.75% in January, 2.50% in February, and 2.25% at the end of March. The real number came finally out yesterday, at 0.20% before revisions.
Of course, this was only a weather-related problem, or at least that is what the FED officials declared at the end of their Open Market Committee:
“Information received since the Federal Open Market Committee met in March suggests that economic growth slowed during the winter months, in part reflecting transitory factors….Although growth in output and employment slowed during the first quarter, the Committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate.”
We will have a first glimpse on how the second quarter has started when the ISM PMI for April is released on Friday, May 1st, but other surveys already published do not suggest any kind of strong acceleration in economic activity during the month.
Not only was GDP much lower than anticipated, but according to Factset, US corporations registered during the first quarter the “Largest Decline in Earnings (-2.8%) Since Q3 2009 (-15.5%).”
Meanwhile, stock markets registered an all-time high just few days ago, becoming even more divergent on fundamentals than they were in October 2007.
If it is too early to call for a recession in the US right now, we must acknowledge that this cycle is already quite “mature” and already passed the average duration in months calculated from the previous trough to the next peak.As the saying goes, perhaps we all need to “Hope for the best and prepare for the worst”.
Sources :
http://www.federalreserve.gov/newsevents/press/monetary/20150429a.htm
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.24.15
http://www.nber.org/cycles.html
Photo credit: Financial Crisis by Petr Kratochvil, CC 1.0 Public Domain
