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It's Q1 Again, Do You Know Where Consumer Spending Is?

Jeffrey Snider profile picture
Jeffrey Snider

Residual seasonality isn't residual, but it is seasonal. The concept was introduced several years ago mostly because Economists were finally being embarrassed about their meteorological predilections. It had become common, far too common, to blame snow, cold, and general wintry like conditions during the winter. Thus, something else had to be brought forward to explain why what looked like a weak economy each and every Q1 couldn't have been a weak economy.

What was hit upon was this residual seasonality, the idea that there was some quirk in the statistics for especially GDP that unfairly subtracted more in any Q1 than was reasonable. The Bureau of Economic Accounts (BEA), the keepers of GDP, disagreed initially but conducted a study anyway. The conclusions of that study also disagreed, but they enacted residual seasonality anyway.

And still the economy stayed weak, only for much more than any single Q1.

The problem was never too much snow nor statistics. The hitch has been Christmas. Americans, as is their choice, love to splurge during the holiday season whether or not doing so is a wise decision. After having broken slightly from prudent practice, by the beginning of the following year consumers have to pay for what they had just done by foregoing in the first part of any year additional spending; ipso facto, figurative residual seasonality.

It is, of course, somewhat inaccurate to blame a holiday any more than it is to blame a season. It's not the fault of Christmas nor where it always falls on the calendar. The big deficiency continues to be, year after year, lack of income and labor market growth. Both are gaining, but positive numbers do not necessarily equate to actual, meaningful growth.

So it begins again for 2018. Retail sales estimates released in the middle of last month

This article was written by

Jeffrey Snider profile picture
As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. Jeff joined Atlantic Capital Management, Inc., in Buffalo, NY, as an intern while completing studies at Canisius College. After graduating in 1996 with a Bachelor’s degree in Finance, Jeff took over the operations of that firm while adding to the portfolio management and stock research process. In 2000, Jeff moved to West Palm Beach to join Tom Nolan with Atlantic Capital Management of Florida, Inc. During the early part of the 2000′s he began to develop the research capability that ACM is known for. As part of the portfolio management team, Jeff was an integral part in growing ACM and building the comprehensive research/management services, and then turning that investment research into outstanding investment performance. As part of that research effort, Jeff authored and published numerous in-depth investment reports that ran contrary to established opinion. In the nearly year and a half run-up to the panic in 2008, Jeff analyzed and reported on the deteriorating state of the economy and markets. In early 2009, while conventional wisdom focused on near-perpetual gloom, his next series of reports provided insight into the formative ending process of the economic contraction and a comprehensive review of factors that were leading to the market’s resurrection. In 2012, after the merger between ACM and Alhambra Investment Partners, Jeff came on board Alhambra as Head of Global Investment Research. Currently, Jeff is published nationally at RealClearMarkets, ZeroHedge, Minyanville and Yahoo!Finance. Jeff holds a FINRA Series 65 Investment Advisor License.

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Comments (2)

The Real DPI is in a tilting trading range since Oct 2015 to Dec 2017. The length is = Y.
If the US economy enter a recession, the distance from Dec 2017 top (if it's the top) to a new Real DPI
low, is likely to be = Y.
How far DPI will fall it depend on the tilt.
So Hyman on Surveillance says US "disposable income is doing great". Did he flunk fractions in grade school? What was ever deep about U3? Why didn't anyone ask him about how autos confirm his disposable comment? It is a world of faulty axioms leading to fantasy analysis.
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