The government’s final (for now) estimate of first quarter, 2016 gross domestic product (GDP) showed that a smaller real total deficit ($546.8 billion) than reported in the previous two estimates turned trade from a growth drag into a growth booster in the first three months of this year. In fact, trade made its biggest relative contribution to quarterly growth (12 percentage points to a 1.07 percent annualized advance) since the fourth quarter of 2013 (1.26 percentage points to a 3.77 percent annualized increase). In addition, real goods exports are now judged to have increased sequentially for the first time since the second quarter of 2015.
Yet the first quarter goods and services trade shortfall remained the second largest on record since the second quarter of 2008, as the Great Recession was deepening. And although the new data brought trade’s cumulative hit to the economic recovery below nine percent, the real growth bite of the policy-influenced Made in Washington deficit remained more than twice as high.
Here are the trade highlights from this morning’s GDP report:
>The U.S. government’s third and final (for now) official look at inflation-adjusted economic growth in the first quarter of 2016 showed that rather than dragging on the current expansion, as per the first two estimates, trade made it biggest relative contribution to the recovery since the fourth quarter of 2013.
>Thanks to a real trade deficit that was downgraded from an already downwardly revised $561.2 billion on an annualized basis to $546.8 billion, trade’s growth role was upgraded from cutting 0.84 percent annualized first quarter growth by 0.21 percentage points to adding 0.12 percentage points to 1.07 percent annualized growth.
>That boost was the biggest in relative terms since trade added 1.26 percentage points to the 3.77 percent annualized real GDP increase in the fourth quarter of 2013.
>The final first quarter real trade deficit also represented a 9.24 percent drop-off from the fourth quarter’s $551.9 billion level.
>Yet the total still amounted to the second biggest real quarterly U.S. trade deficit on record, following that fourth quarter level and the $550.4 billion registered in the second quarter of 2008, as the last recession was gathering steam.
>In the fourth quarter, trade subtracted 0.14 percentage points from 1.38 percent annualized inflation-adjusted growth.
>According to these final first quarter figures, 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 8.36 percent. That’s better both than the 9.07 percent trade growth drag calculable from the previous set of first quarter GDP figures, and than the 8.78 percent subtraction as of the fourth quarter.
>Yet the final first quarter growth bite from trade flows impacted most heavily by trade deals and other policies – the Made in Washington deficit – is likely to be much greater.
>According to the latest monthly U.S. trade data, issued separately by the Census Bureau, through the first quarter of this year, this after-inflation non-oil goods deficit has reduced cumulative recovery-era real growth by 20.13 percent. As of the fourth quarter last year, the toll was 19.76 percent.
>The new trade data were boosted both by better performances both by after-inflation first quarter combined goods and services exports and imports.
>Rather than falling by 0.51 percent sequentially, as the previous GDP figures estimates, real total exports edged up by slightly less than 0.09 percent.
>At $2.1121 trillion annualized, these exports are still 0.56 percent below their absolute peak of $2.1239 trillion annualized, achieved in the fourth quarter of 2014.
>Real annualized total imports were revised down further, and are now pegged at $2.6588 trillion annualized. This total represents a 0.13 percent decrease from the fourth quarter level of $2.6622 trillion. (The previous first quarter estimate showed them down only 0.06 percent sequentially.)
>Combined real goods and services imports remained at 0.31 percent below their absolute peak of $2.6672 trillion annualized, reached in the third quarter of last year.
>Rather than falling by 0.66 percent sequentially in the first quarter, real goods exports are now judged to have risen by 0.27 percent. At $1.4327 trillion annualized, these exports remain 2.82 percent below their peak of $1.4743 trillion, reached in the fourth quarter of 2014.
>The first quarter rise also stands as the first enjoyed by real goods exports since the second quarter of 2015.
>The sequential decrease in first quarter real goods imports was revised from 0.29 percent to 0.34 percent. They now stand at $2.1714 trillion on an annualized basis, and after this second straight quarter-to-quarter drop are now 0.67 percent below their peak level of $2.1860 trillion, set in the third quarter of last year.
>The new GDP revisions reduced the first quarter annualized real services exports estimate from $677.3 billion to $677.1 billion. This decrease left such exports at 0.27 percent lower than the fourth quarter annualized total of $678.9 billion – their all-time high.
>The new data also confirmed the first sequential real services export decline since the third quarter of 2014.
>The first quarter annualized real services imports level was revised lower, too – from $486.3 billion to $485.5 billion. As a result, real services imports are now judged to have increased by only 0.77 percent sequentially, though the new lower figure still represents their sixth straight record quarterly total.