by Calculated Risk on 7/16/2015 07:52:00 PM

Excerpts from a research piece by Goldman Sachs economist Zach Pandl on GDP:

Although most of the inputs used to calculate GDP are seasonally adjusted, the topline growth numbers still appear to fluctuate with seasonal patterns. The BEA intends to address this “residual seasonality” as part of its annual GDP revisions later this month. While the new estimates will be an improvement, they look unlikely to remove residual seasonality altogether.

According to our estimates, reported GDP growth tends to run about 1pp below other measures of real activity (like GDI or our CAI) in Q1 of each year. These estimates are statistically significant across a variety of samples. The BEA has said it will revise several components of GDP, rather than address residual seasonality at the aggregate level. We estimate that the likely revisions will affect Q3 and Q4 the most, with only modest effects on Q1 of about 0.3pp. Thus, our preliminary estimates suggest that Q1 GDP figures will remain about 0.7pp too low.

Residual seasonality is just one reason we track other measures of growth in conjunction with GDP. The BEA also seems to see the value in this approach, and with the revision will begin publishing other aggregate measures to “facilitate the analysis of macroeconomics trends”.

Friday:
• At 8:30 AM ET, the Consumer Price Index for June from the BLS. The consensus is for a 0.3% increase in prices, and a 0.2% increase in core CPI.

• Also at 8:30 AM, Housing Starts for June. Total housing starts decreased to 1.036 million (SAAR) in May. Single family starts decreased to 680 thousand SAAR in May. The consensus is for total housing starts to increase to 1.125 million (SAAR) in June.

• At 10:00 AM, the University of Michigan's Consumer sentiment index (preliminary for July). The consensus is for a reading of 96.2, up from 96.1 in June.