Today’s durables goods report was the latest in a string of macroeconomic disappointments over the last few weeks. This phenomenon is most easily seen by the following chart of the Globe and Mail:Economic Surprise Index, taken from the
For the past 2 years, the upside surprises peaked in the winter, and bottomed in the summer. This year’s path looks eerily similar so far, leading us to believe that the economic data has more to do with the seasonal adjustment process than the underlying fundamentals (or the oft-cited warm winter). Both Bloomberg and the FT ran articles a few months ago focusing on research by seasonal adjustments.and which highlighted potential distortions to the economic data set from
“The impact of the financial crisis does seem to have affected seasonal factors for several indicators,” Andrew Tilton, a senior economist at Goldman Sachs
Nomura suggest that, although the decline is indicative of a positive trend, the scale of the improvement is almost certainly being warped by those darn seasonal factors — adjustments which have been distorted by the extra-large economic shock in 2008-09.
in both 2010 and 2011 the S&P 500 rallied in the first four months of the year.In 2010, the S&P 500 was up 9.2% when it reached its first half peak on 4/23. From there, the index dropped sharply and was down as much as 10% YTD before rallying when the Fed stepped in with QE2. In 2011, we saw a similar pattern. When the S&P 500 reached its first half peak on April 29th, the index was up 8.4% on the year. From there, it was a downward slide as the index fell roughly 20% through October. Then late in the year, the market once again rallied when the Summer ended and the Fed stepped in with ‘Operation Twist.’