Enis’s Macro Wrap – Seasonality Still Reigns

by Enis November 14, 2012 7:38 am • Commentary

CC wrote about the impact of seasonality on macroeconomic data all the way back in April.  Directly from that post:

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 Goldman Sachs andNomura which highlighted potential distortions to the economic data set from seasonal adjustments.

“The impact of the financial crisis does seem to have affected seasonal factors for several indicators,” Andrew Tilton, a senior economist at Goldman Sachs

Here’s Nomura (via FT)

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.

I was arguing yesterday with another macro trader about the broader global business cycle.  His argument was that the macro data had bottomed in the summer, and looked more favorable over the past few months.  The seasonality story immediately came to mind.

Retail sales data will be released at 8:30am EST today.  Here is a 5 year chart of retail sales data:



The only negative readings over the past 3 years have been in the May / June period (circled in red), while the strongest readings have generally been in Sept/Oct/Nov.  I am still of the belief that the very weak comparisons in the data from Sept/Oct/Nov 2008 continue to affect the macroeconomic data.

If so, expect a beat on retail sales today.  Perhaps more interesting is that this is the first time in 3 years that the market has not rallied in the Sept-Nov period, suggesting that investors are more concerned with micro weakness (unaffected by seasonality) than macro strength.

Markets overnight:

  • Asia was mostly green, led by Hong Kong up more than 1%.  Japan delayed its own fiscal cliff, leading to a new parliamentary election.
  • Europe has fluctuated around unchanged, but down 0.5% right now.  Weak industrial production data continued the drumbeat of negative macro data from Europe.
  • SPX futures 0.3% higher after they sold off 10 points in the last hour and a half yesterday.
  • The dollar is slightly lower vs. most crosses, with the exception of the yen, which is down 1% after the election news
  • Treasury bonds are lower, and commodities close to flat.
  • Retail sales and PPI data at 8:30 am, FOMC minutes at 2pm