The government’s first estimate of first quarter, 2016 gross domestic product (GDP) showed that the real trade deficit hit its highest level ($566.6 billion) since the first quarter of 2008. As a result, trade cut weak inflation-adjusted first quarter growth of 0.54 percent annualized by 0.34 percentage points – the biggest drag after the drop in gross private fixed investment (0.60 percentage points).
The new first quarter numbers mean that trade has now slowed cumulative growth during this already sluggish U.S. recovery by 9.37 percent – despite the dramatic drop in the country’s oil trade shortfall. The quarter’s real trade deficit was driven mainly by falling real exports. Real goods exports worsened for the third straight quarter, and real services imports rose for the sixth straight quarter and hit their sixth consecutive quarterly record ($486.2 billion).
Here are the trade highlights from this morning’s GDP report:
>The biggest U.S. inflation-adjusted trade deficit since the start of the Great Recession helped drag down real American economic growth in the first quarter of this year to its slowest level since early 2014.
>According to this morning’s first read on first quarter gross domestic product (GDP), the trade shortfall increased from $551.9 billion annualized in the fourth quarter of last year to $566.6 billion. That figure is the highest in absolute terms since the first quarter of 2008.
>Moreover, the quarterly worsening of the trade deficit (by 2.66 percent), is the greatest such deterioration since last year’s first quarter (16.74 percent).
>This increase resulted in trade subtracting 0.34 percentage points from the quarter’s measly 0.54 percent real annualized growth, the second biggest growth drag after gross private investment (0.60 percentage points).
>In the fourth quarter, trade subtracted 0.14 percentage points from 1.38 percent annualized after-inflation growth.
>As of the first quarter, the growth of the real trade deficit has cut cumulative constant-dollar U.S. growth during the current, historically weak economic recovery (which began in the second quarter of 2009) by 9.37 percent.
>Yet the bite from growth from trade flows impacted most heavily by trade deals and other policies is likely to be much greater.
>As of the fourth quarter of last year, the recovery-era growth of the real non-oil goods trade deficit had reduced cumulative real growth by a stunning 19.76 percent.
>The figure for the first quarter can’t be calculated until the March monthly U.S. Trade figures are released next week, but so far the real non-oil goods deficit is running ahead both of the fourth quarter level and last year’s first quarter level.
>The biggest contributor to the trade deficit’s increase in the first quarter was the 0.64 percent annualized drop in exports, from $2.1103 trillion to $2.0967 trillion.
>Real goods and services exports have now dropped sequentially for two straight quarters, and stand 1.28 percent below their absolute peak of $2.1239 trillion annualized, achieved in the fourth quarter of 2014.
>Real annualized total imports edged up by 0.04 percent, from $2.6622 trillion in the fourth quarter to $2.6633 trillion. They now stand only 0.15 percent below their absolute peak of $2.6672 trillion annualized, reached in the third quarter of last year.
>Real annualized goods exports in the first quarter fell sequentially by 0.86 percent, from $1.4289 trillion annualized to $1.4166 trillion – their lowest level since the first quarter of 2014 and 3.91 percent below their peak of $1.4743 trillion, during the fourth quarter of 2014.
>These exports have now fallen sequentially for three straight quarters.
>Real annualized goods imports dipped by 0.16 percent sequentially in the first quarter, from $2.1787 trillion to $2.1752 trillion. This second straight drop left them at 0.49 percent below their peak of $2.1860 trillion in the third quarter of last year.
>Real annualized services exports fell sequentially for the first time since the third quarter of 2014. But the decrease was only 0.24 percent, from the fourth quarter’s record $678.9 billion to $677.3 billion.
>Real services imports rose quarter-to-quarter for the sixth straight quarter – by 0.91 percent, to a record $486.2 annualized. These imports have also now set records for six consecutive quarters.