Greg Ip, writing in today's Wall Street Journal (page A2 of the print edition), puts his finger on at least one of the problems:
The swing from a warm January to a snowy February is playing havoc with economic data, making it difficult to ascertain the economy's trend.
In January, housing starts and retail sales were strong and claims for unemployment insurance were low -- a snapshot of an exceptionally robust economy. But that may be because warm weather encouraged shoppers to hit the malls and builders to press ahead with construction. If so, then February may look weak, an image compounded by the blizzard that hit the Northeast on Feb. 12. Yet that weakness will also be misleading.
"How much of [January's] strength reflects underlying acceleration and how much of it is temperature?" says David Greenlaw, an economist at Morgan Stanley. In February, "you've got to gauge not just the degree of retracement from an elevated January but also the distortions arising from any severe storm impacts."
The sad truth is that, given the weather ups and downs and the still uncertain timing of Katrina's and Rita's economic aftermath, it is entirely possible that the first quarter of 2006, like the fourth quarter of 2005, will tell us next to nothing about where the fundamentals are moving. And here's the rub:
The confusion comes at a delicate time. After a series of interest-rate increases beginning in mid-2004, the Federal Reserve and Wall Street are trying to discern whether the economy has slowed too much, has not slowed enough, or is growing at just the right speed.
A delicate time indeed.
UPDATE: Tim Duy thinks there is considerably less uncertainty than Ip (and I) suggest.