Download Will the Weather and Seasonal Effects Impact First

ECONOMIC STUDIES | APRIL 4, 2017
ECONOMIC NEWS
United States: Will the Weather and Seasonal Effects Impact
First Quarter Real GDP?
Several economic indicators are showing nice improvement in
the United States. Paradoxically, we expect a weak advance
in real GDP in the first quarter. Of the factors underlying this
underperformance, we note two items that also hampered
growth in the first quarters of prior years: the weather and
problems with seasonal adjustments.
GRAPH 1
Warmer weather leads to a decrease in household energy
spending
Real consumption of services – electricity and gas
Quaterly annual variation in %
50
40
30
Weather often impacts economic growth. Think back to the
“polar vortex” during winter 2013‑2014. Storms also play
a role. This year, it’s unusually mild weather that is making
the difference. Above‑average temperatures have depressed
household energy demand. This component represents less
than 2% of total consumer spending, but it is one of the most
volatile, whereas other service spending is much more stable.
After two months, spending on electricity and gas had a negative
carryover of close to 40%. Without a rebound in March, it will
be the worst drop since data has been collected. This pullback
has already driven down total real consumption during January
and February.
The other phenomenon is more statistical in nature. For several
years, economic growth has generally been less robust in the first
quarter. The difference has been around 1% since the middle of
the 1990s (it lessens if we exclude the years of recession). The
Bureau of Economic Analysis has already tried to address the
situation in one of its historical revisions, but the seasonal effect
seems to remain and it could again impact growth for early 2017.
20
10
0
-10
-20
Carryover after
January and
February
-30
-40
2013
2014
These factors suggest that U.S. real GDP growth will be weak
in the first quarter, despite good performance by confidence
indexes and the job market. However, they also suggest a
rebound in real GDP as early as spring. The Federal Reserve could
account for this situation by waiting until September before
raising its key rates.
2016
2017
Sources: Bureau of Economic Analysis and Desjardins, Economic Studies
GRAPH 2
Growth is historically weaker in the first quarter each year
Real GDP – average since 1995
Quarterly annual variation in %
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
First quarter
Second quarter
Total period
IMPLICATIONS
2015
Third quarter
Fourth quarter
Excluding recessions
Sources: Bureau of Economic Analysis and Desjardins, Economic Studies
Francis Généreux, Senior Economist
François Dupuis, Vice-President and Chief Economist • Mathieu D’Anjou, Senior Economist
Benoit P. Durocher, Senior Economist • Francis Généreux, Senior Economist • Jimmy Jean, Senior Economist • Hendrix Vachon, Senior Economist
Desjardins, Economic Studies: 514‑281‑2336 or 1 866‑866‑7000, ext. 5552336 • [email protected] • desjardins.com/economics
NOTE TO READERS: The letters k, M and B are used in texts and tables to refer to thousands, millions and billions respectively.
IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data
obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer
or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice,
notably in the area of investment services. The data on prices or margins are provided for information purposes and may be modified at any time, based on such factors as market conditions. The past performances and projections
expressed herein are no guarantee of future performance. The opinions and forecasts contained herein are, unless otherwise indicated, those of the document’s authors and do not represent the opinions of any other person or the
official position of Desjardins Group. Copyright © 2017, Desjardins Group. All rights reserved.