A provocative piece from UBS’s Drew Matus (Deputy Chief US Economist, Managing Director at UBS Investment Bank) in a research note for clients, and he doesn’t mince words:
- “while the -2.9% reading may have been a bit of a shock, it is useful to view it in comparison to other measures of activity. When the comparisons are made, it is clear that one data point stands out as the aberration, the GDP figure.”
- “The ISM manufacturing index averaged a 52.7 in the first quarter, a slowdown from the 56.7 reported in the fourth quarter. However, a 52.7 ISM index reading has historically been associated with a GDP reading closer to +3% than -3%.”
- Employment, where jobs gained 1.5% year-on-year – that’s also consistent with GDP growth north of 3%
He says other indicators too are at odds with GDP:
- Unemployment fell
- Consumer confidence rose
- Industrial production gained
Based on all these other indicators … growth should have been 3.6%
- “When a single data point is pointing in a direction opposite of that of all other data, it is worth questioning its validity”
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So there.
