Some business travel prevented me from issuing a same-day report on last Friday’s Commerce Department report on the gross domestic product. But since they officially close the books on 2014 (for the time being!), it’s worth reviewing what they tell us about how America’s trade performance – especially since they’re the last word on trade flows adjusted for inflation, which reveal how they affect the nation’s economic growth.
>This second revision of fourth quarter GDP 2014 figures showed that America’s trade performance at the end of last year was a tad better than initially estimated, but that international commerce still bears most of the blame for the period’s growth slowdown. Moreover trade subtracted from growth during the entire year.
>The fourth quarter real trade deficit came in at $471.4 billion at an annualized rate – slightly lower than the $471.5 billion in the first estimate, and the $476.4 billion figure in the previous revision. This trade shortfall remained America’s biggest since the third quarter of 2010, when it hit $498.4 billion.
>As a result, the final fourth quarter data showed that a growing trade deficit subtracted 1.03 percentage points from that period’s 2.20 percent annualized growth. The initial estimate pegged the trade damage at 1.02 percentage points from 2.62 percent annualized growth, while the revision increased that trade hit to 1.15 percentage points from 2.17 percent annualized growth.
>All these figures, however, are much worse than the third quarter data – which showed a falling trade deficit adding 0.78 percentage points to a strong 5.00 percent annualized real growth figure.
>Moreover, on a full-year basis, whereas a narrowing U.S. trade deficit added 0.22 percentage points to real GDP growth’s 2.22 percent real growth in 2013, the gap’s widening subtracted 0.22 percentage points from 2014’s 2.39 percent growth in real terms. The previous set of fourth quarter GDP numbers showed that the increasing trade gap cut 0.23 percentage points from the same 2.39 percent annualized growth, while the initial estimate showed a 0.22 percentage point subtraction from a higher 2.42 percent 2014 percent real GDP growth figure.
>2014 remains the first year during which the trade deficit worsened and therefore slowed growth since 2011.
>According to these latest GDP figures, since the current economic recovery began in the middle of 2009, the trade deficit’s increase has cut cumulative real GDP growth by 5.42 percent. That’s a better result than the 5.68 percent reduction revealed by the previously revised fourth quarter numbers but worse than the 5.38 percent trade hit initially estimated for the fourth quarter.
>Moreover, this trade deficit worsening has taken place despite the remarkable recent improvement in the nation’s energy trade.
>Indeed, the U.S. non-oil goods trade deficit’s increase in real terms, according to the latest full-year 2014 trade figures, has cut the cumulative growth of the current weak American recovery by 15.71 percent. Worse, virtually all of s lost growth has come in the private sector.
>The non-oil goods trade data is especially important because these are the trade flows that are most strongly influenced by trade agreements and related policy decisions. The dramatic trade deficit worsening and resulting GDP hit strongly indicate that the new trade agreements being pushed by President Obama – which are modeled on current trade deals – will further undercut growth, and therefore job-creation.
>Ominously, the case for trade deals and policy slowing the recovery grew in January, when the real non-oil goods deficit set its second straight monthly record, rising from $49.19 billion to $50.48 billion.
>The revised GDP figures pushed the increase in U.S. real exports since the first quarter of 2009 to 38.18 percent – more than the 37.98 percent improvement reported in the initial fourth quarter, 2014 estimate and the 38.12 percent revealed in last month’s revision. Nonetheless, they still fall way short of President Obama’s commitment to double them by the end of 2014. Future revisions cannot possibly upgrade this dismal performance significantly.