Thursday, June 26, 2014

John Hinderaker and Steve Hayword -- Please Stop Commenting On the Economy. Really.

John -- this is getting embarrassing for you.  Yesterday, you tried to offer a commentary on the 1Q GDP numbers, arguing policy was the reason.  You went so far as to note Canada's GDP grew while ours shrank despite the same weather conditions (gee -- where on earth did you get the idea to use Canada as a comparison?). 

However, once again, your analysis was, well, wrong.  Todays' Financial Times notes that weather and health care spending were the big culprits for the slowdown. 

Bloomberg (which is used by everybody in the financial world) noted:

The first-quarter slump is “not really reflective of fundamentals,” said Sam Coffin, an economist at UBS Securities LLC in New York and the best forecaster of GDP in the last two years, according to data compiled by Bloomberg. “For the second quarter, we’ll see some weather rebound and a return to more normal activity after that long winter.”


The weather earlier this year also hampered production at factories, which had trouble obtaining materials in time. Since then, assembly lines have become busier.

There is also the fact that inventory builds subtracted 1.7% from the GDP number as well.  This number is a big statistical outlier in that specific data series, meaning we're again looking at a one off. 

This analysis is being offered by, well, everyone in the economics commentary field -- except you.  As usual, your analysis is the outlier.

Really, John, don't you think it's time to just call it a day and stop writing about economics?

And not to be outdone, we have Steve Hayward with this quote from an AEI economist:

The Fed has uttered not a word about the very weak GDP numbers and their implications for its rosy prediction of 3% growth. Nor has it said anything about possible changes in Fed policy aimed at sustaining growth. The Fed Chairman, Janet Yellen, chose instead to look ahead to a growth rebound based on stronger growth of consumption and investment. The Fed’s only policy option, if it can be called that, is to talk about further delaying the first rate increase in interest rates that it mandates. Markets have set that date at about mid-2015. No doubt it will slip further to early 2016 given the weakness of the US economy.

Really?  You might want to look on the Federal Reserve website where we have this from May 7

The economy has continued to recover from the steep recession of 2008 and 2009. Real gross domestic product (GDP) growth stepped up to an average annual rate of about 3-1/4 percent over the second half of last year, a faster pace than in the first half and during the preceding two years. Although real GDP growth is currently estimated to have paused in the first quarter of this year, I see that pause as mostly reflecting transitory factors, including the effects of the unusually cold and snowy winter weather. With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter. One cautionary note, though, is that readings on housing activity--a sector that has been recovering since 2011--have remained disappointing so far this year and will bear watching.

While the AEI guy may be stating the Fed should make an "emergency announcement" about the report, it's important to note the Fed just doesn't do that, barring say a financial crisis like the Lehman bailout.  There is a very high possibility that such a statement would spook the markets further rather than providing any kind of balm.

In addition, the Fed has lowered their growth projections for the rest of the year, largely in response to the 1Q report.

Steve -- again, and like John, you're embarrassing yourself.  You really should stick with politics.