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According to analysts at TD Securities, for the US economy, residual seasonality continues to be a lingering factor in first and second quarter GDP data.

Key Quotes

“Despite a recent effort by the Bureau of Economic Analysis aimed at addressing this shortcoming, studies suggest seasonality effects are still persistent in the seasonally-adjusted growth figures.”

“According to recent research by the Federal Reserve Bank of Cleveland, residual seasonality reduces GDP growth in the first quarter by -0.6pp on average, while it boosts the second quarter by 0.5pp. These results largely match what has been evident in the data in recent years.”

“This pattern suggests some lingering residual seasonality could affect the upcoming release of Q1 GDP data (out on 26 April). Nowcast estimates suggest Q1 GDP growth might exceed 2%, despite a number of uncertainties at the beginning of the year. We forecast GDP growth to print 2.3% in Q1.”

“If this forecast holds, then Q2 GDP growth might not be as strong as some market participants have been expecting, given a negative relationship between quarters. However, we could well end up with more of a “goldilocks” scenario in which GDP grows at or above potential in both quarters.”