We still firmly believe that the weakness of first-quarter GDP was principally due to the unseasonably severe winter, the meltdown in the shale oil industry and possibly some seasonal quirks too. In theory, all of those transitory factors should fade soon, with second-quarter GDP growth rebounding sharply. Nevertheless, it is important to acknowledge that the incoming data for April have been mixed. In particular, underlying retail sales actually contracted slightly last month, leaving them even further below trend. The longer it takes for the rebound to show up in the data, the longer it will be before the Fed begins to raise its policy rate. Right now the most likely lift-off date is probably September.
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