The government’s second estimate of fourth quarter, 2015 gross domestic product (GDP) showed that trade’s drag on the economy’s real growth at the end of last year and for the full year was smaller than initially estimated. Yet last Friday’s revised figures also made clear that the trade deficit’s growth during both periods remained the biggest roadblock to an acceptably strong recovery; that trade’s hit to growth remained at multi-year highs; and that the shortfall’s rebound has slowed the current weak expansion by more than nine percent.
In addition, although the new data reduced the stand-still inflation-adjusted trade deficit numbers for the fourth quarter and 2015 year as a whole from those in the first estimate, both stayed at their highest levels since 2008, as the last recession was gaining strength. Indeed, the trade gap’s increase from 2014 to 2015 was its biggest annual jump since 2000.
On a more positive note, the revised GDP data showed that total imports and goods imports fell slightly (from new record levels) rather than rose slightly from quarter-to-quarter. At the same time, the new figures left intact the first export drop extending for two consecutive quarters since the height of the financial crisis in late-2008/early 2009.
Here are the detailed trade highlights from last Friday’s GDP report:
>Today’s gross domestic product (GDP) figures, which present the second read on the fourth quarter of 2015 and on full-year 2015, show that the U.S. real trade deficit’s subtraction from sluggish growth during both periods was smaller than originally estimated, but remained the biggest obstacle to an adequate recovery. The new data similarly revised the actual quarterly and annual trade shortfalls down slightly, but still pegged both at multi-year highs.
>The new release pegged pegged the annualized fourth quarter inflation-adjusted trade deficit at $556.8 billion – lower than the initially reported $566.5 billion but still the highest quarterly figure since the $550.4 billion recorded for the second quarter of 2008.
>This real trade gap, 1.96 percent higher than the third quarter figure of $546.1 billion, subtracted 0.25 percentage points from the upwardly revised overall annualized growth figure of one percent for the quarter – a smaller bite than the 0.47 percentage points trade sliced from the previously estimated 0.69 percent annualized growth.
>Nonetheless, this trade hit was the biggest subtraction to growth from a subpar quarter.
>The new GDP figures also reported a smaller full-year 2015 trade deficit than last month’s release – $544.7 billion versus $547.1 billion. In addition, this trade gap was still the biggest such figure since the $557.8 billion shortfall of 2008, as the last recession was strengthening, and the annual deterioration it represents is still the worst (23.09 percent) since 2000 (26.70 percent).
>This annual trade deficit cut 0.64 percentage points from last year’s 2.40 percent real growth increase – a smaller hit than the originally reported 0.66 percentage point subtraction from 2.38 percent growth. But the deficit’s growth also was the biggest negative in that year’s economic performance and still the worst such hit to yearly growth in absolute and relative terms since 2004 and 2002, respectively.
>As a result of these new figures, trade’s drag on the entire economic recovery is slightly smaller than the previous GDP release revealed, but still substantial. Has the after-inflation trade shortfall simply held steady since the current expansion began, in the second quarter of 2009, the economy’s cumulative expansion would have been 9.07 percent greater, rather than 9.59 percent greater. The growth hit in absolute terms consequently shrunk from $200.20 billion in constant dollars to $190.50 billion.
>In the third quarter of 2015, worsening net trade reduced that period’s annualized 1.97 percent growth by 0.26 percentage points, and for all of 2014, the cost was 0.18 percentage points out of 2.43 percent real growth.
>Separate figures (from the Census Bureau) show that the recovery drag of that portion of the trade deficit strongly influenced by trade deals and related policies – the real non-oil goods deficit – has been much greater. Since the second quarter of 2009 through the fourth quarter of 2015, its increase has cut cumulative recovery-era growth by fully 19.93 percent, or $418 billion 24.43.
>These figures are down from the 24.43 percent ($502.86 billion) numbers reported through the end of the third quarter.
> The new fourth quarter data showed that total U.S. inflation-adjusted exports fell more sequentially from the third quarter’s annualized $2.1211 trillion than initially reported. The new $2.1066 trillion total that replaced the first $2.1078 trillion estimate is 0.68 percent lower than the third quarter’s $2.1211 trillion. It also still represents the first quarter-to-quarter export drop since the winter-affected first quarter of the year.
>Yet this morning’s data turned the initially reported sequential total real imports increase into a decline – and pushed them back below record levels. Rather than growing quarter-to-quarter from an annualized $2.6672 trillion to a new record $2.6743 trillion, they fell to $2.6634 trillion according to the second GDP estimate.
>The GDP revisions also revealed a larger annualized sequential real goods exports decline than reported in last month’s release. Instead of falling from $1.4488 trillion in the third quarter to $1.4287 trillion, the new level was placed at $1.4273 trillion. Yet the new figures still mean that quarterly real goods exports have now dropped consecutively for the first time since the end of the last recession, in the second quarter of 2009.
>An originally reported third-to-fourth-quarter annualized constant dollar goods import increase was also transformed into a decline by the new GDP figures. Instead of inching up from an annualized $2.1860 trillion to $2.1895 trillion – a new quarterly record – they declined to $2.1794 trillion.
>This morning’s GDP data also revised full-year 2015 goods and services exports down slightly, from $2.1095 trillion to $2.1091 trillion. That represents a 1.09 percent increase over the 2014 total – the worst such annual performance since recessionary 2009, when they fell.
>Full-year 2015 total imports were also revised down slightly, from $2.6565 trillion to $2.6538 trillion. This total amounted to a 4.94 percent rise from 2014’s $2.5289 trillion – and still came to another new record.
>In goods trade, full-year 2015 exports were revised down this morning from $1.4397 trillion to $1.4394 trillion. This 0.25 percent dip from 2014’s $1.4430 trillion level remained the first annual drop since the recession year 2009.
>2015 goods import totals were downgraded, too – from $2.1788 trillion to $2.1762 trillion. As a result, they are now judged to be up 4.93 percent from the 2014 total of $2.0765 trillion, and still represent a new record high, too.
>This morning’s revisions slightly upgraded fourth quarter inflation-adjusted service export figures and slightly downgraded import levels. Both remained at record levels.
>Full-year 2015 services export totals were similarly, and modestly adjusted, and remained at record levels, too.