Monday, June 9, 2014

Cold weather used as excuse for poor economic data

Economists, investment analysts, and politicians have spent much of 2014 bemoaning the terrible economic effects of the winter of 2014. The cold and snow have been continuously blamed for the lackluster job market, disappointing retail sales, tepid business investment and, most notably, much slower than expected GDP growth. Given how optimistic many of these forecasters had been in the waning months of 2013, when the stock market was surging into record territory and the Fed had finally declared that the economy had outgrown the need for continued Quantitative Easing, the weather was an absolutely vital alibi. If not for the excuse of the bad weather, the entire narrative of a sustainable recovery would have been proven false.

Remarkably, this optimism was largely undiminished when the preliminary estimate for first quarter GDP came in at a shocking minus one percent annualized. This number, almost four percentage points lower than the forecasts from the end of 2013, hinted at an economy on a path toward recession. Still, the experts brushed off the report as a weather-related anomaly.

In contrast, I spent the better part of the last five months arguing that the weather was a straw man. I saw a fundamentally weak and contracting economy being artificially propped up by Fed stimulus, illusory accounting, and massive federal deficit spending. 

However, while it is difficult to precisely measure the effects of bad weather on the economy, a fresh look at the historical data does tell me that a bad winter usually has an economic effect, but not nearly enough to support the oversize excuses being made by our leading pundits.

via GoldSeek

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009