Revised GDP figures for the first quarter of the year came out this morning, and as a heated trade policy debate continues to roil Congress, the data confirm that U.S. trade flows have been a major drag on an historically weak recovery. The dramatically increased trade shortfall not only took its biggest bite out of the quarterly growth since the fourth quarter of 2002, but has slowed cumulative real economic growth by nearly ten percent since the recession technically ended in mid-2009.
Moreover, the latest (March) monthly U.S. trade figures – released separately earlier this month – made clear that the trade hit to growth from flows heavily influenced by trade deals and related policies was nearly twice as great. And worse is sure to come if the president persuades Congress to pass new agreements based on deficit-boosting predecessors, along with the fast track negotiating authority that would speed their approval.
In addition, despite West Coast ports labor problems, real imports and real goods imports both hit new records in the first quarter while exports sank, indicating how lopsided the nation’s trade performance remains. The result was the biggest quarterly trade deficit since early 2008 – when the economy was still growing.
Here are the trade highlights from this morning’s GDP report:
>The initial first quarter GDP figures confirm that the trade deficit’s expansion delivered the biggest hit to sequential economic performance since the end of 2002. During that fourth quarter of that year, the trade deficit’s increase took 1.60 percentage points from an annualized real growth figure of 0.30 percent. In the first quarter of this year, the trade deficit’s increase accounted for 1.90 percentage points of an inflation-adjusted annualized GDP shrinkage of 0.75 percent.
>The initial first quarter numbers, released last month, showed that trade subtracted 1.25 percentage points from an annualized growth figure of 0.20 percent.
>During the fourth quarter of 2014, a widening sequential trade shortfall reduced the 2.20 percent annualized growth by 1.03 percentage points.
>As of this morning’s revisions, the worsening of the trade deficit has reduced the cumulative real growth of the U.S. economy by 9.54 percent since the current recovery began in the second quarter of 2009.
>This figure, however, includes the huge improvement the nation has enjoyed in its oil trade thanks to the recent domestic energy production revolution.
>Contrary to the claims by President Obama and supporters of his trade policies, the trade hit to the recovery delivered by trade agreements and related policies has been much worse. Strip out oil (not a subject of trade talks) and services (where liberalization remains at an early stage), and as of full-year 2014, the worsening of the remaining, policy-shaped trade deficit has slowed the recovery by 19.49 percent – with nearly all the damage done in the private sector.
>The upcoming release of the monthly trade report for April, containing March revisions, will enable the trade hit to the recovery to be updated.
>The new GDP figures confirm that if West Coast ports problems have affected America’s trade flows, the impact was largely one-way. U.S. overall real exports and real goods exports both fell significantly from the fourth quarter of 2014 to the first quarter of 2015 (by 7.6 percent and 14.0 percent, respectively). Last month’s initial GDP estimate put these figures as 7.2 percent and 13.3 percent, respectively. As a result, the quarterly goods export drop remains the worst since the 34.90 percent nosedive in the first quarter of 2009 – the depths of the recession.
>Yet the revised GDP figures show that the records set for overall imports and goods imports still stand. The former rose sequentially by 5.60 percent – much more than the initial estimate of 1.80 percent – to $2.6339 trillion on an annualized basis. The latter increased by 5.1 percent sequentially – also much greater than last month’s initial 0.90 percent figure – to $2.1497 trillion). The growth in both categories of imports contrasts strikingly with the overall economy’s shrinkage.
>These slumping exports and surging imports drove the quarterly annualized real trade deficit to its highest level ($584.4 billion) since the second quarter of 2008 ($550.4 billion) – when the economy was still growing.