The government’s release of advance figures for second quarter 2016 gross domestic product (GDP), and revisions going back to the first quarter of 2013, showed that in 2015, the trade deficit’s increase took its biggest bite out of real annual U.S. growth trade in absolute terms (0.71 percentage points out of a 2.60 percent expansion) since 2000 (0.82 percentage points out of 4.09 percent growth). The relative growth bite was the biggest since 2002 (0.64 percentage points out of 1.79 percent growth).
Trade has boosted growth during the first two quarters of this year – including by its greatest amount since the fourth quarter of 2013. But the revisions upgraded recent after-inflation quarterly deficits to their highest levels since the onset of the Great Recession – including the $566.6 billion third quarter 2015 real deficit that was the biggest since the first quarter of 2008 ($623.7 billion).
As a result, trade’s growth hit to the current feeble economic recovery stayed near nine percent in constant dollar terms, and the cumulative growth hit of the Made in Washington portion of the shortfall could have reached more than twice that level – and hit half a trillion dollars.
Here are the trade highlights from this morning’s GDP report:
>The U.S. government’s first official look at inflation-adjusted economic growth in the second quarter of 2016, accompanied by revisions dating back to the first quarter of 2013, revealed that the rebound in the U.S. trade deficit last year took its biggest bite out of the economy’s feeble real growth in more than a decade in absolute and relative terms.
>In 2015, trade subtracted 0.71 percentage points from that year’s 2.60 percent inflation-adjusted expansion.
>That growth hit represented the biggest in absolute terms since the deficit’s increase slowed 2000’s 4.09 percent real expansion by 0.82 percentage points.
>In addition, trade’s 2015 economic toll was the biggest in relative terms since it subtracted 0.69 percentage points from 2002’s 1.79 percent constant dollar growth.
>The new GDP figures confirmed that trade became a growth booster in the first quarter of 2016. But its contribution was only 0.01 percentage points out of 0.83 annualized real expansion. And both numbers were revised down – from the previous 0.12 percentage points contributed to 1.07 percent annualized constant dollar growth.
>The advance figures for the second quarter show a marked improvement – with a slightly lower real trade deficit adding 0.23 percentage points to 1.21 percent annualized real growth. That’s the greatest relative growth contribution since trade increased the 3.90 percent annualized real output increase in the fourth quarter of 2013 by 1.29 percentage points.
>Nonetheless, recent quarterly deficits have been revised significantly higher in absolute terms – to levels not seen since the onset of the Great Recession, more than eight years ago.
>The third quarter, 2015 real trade deficit is now pegged at $547.1 billion annualized, not the $546.1 billion previously reported. The fourth quarter’s after-inflation shortfall was revised up to $566.6 billion annualized from $551.9 billion. And the first quarter gap was upgraded from $546.8 billion to $566.3 billion.
>Those last two figures represent the highest quarterly real trade deficits since the $623.7 billion recorded in the first quarter of 2008. And running right behind them is the $556.3 billion advance estimate for the second quarter.
>According to these initial second quarter figures, the increase 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 8.56 percent.
>Yet the final 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 goods deficit – which strips out the massive improvement in America’s oil trade – has reduced cumulative recovery-era real growth by 20.13 percent.
>The still-elevated real trade deficit revealed in today’s GDP figures – which include the much better oil results – indicate that when the June monthly trade statistics are published by the Census Bureau next Friday, the real non-oil goods trade deficit will have grown even higher, and increased the inflation-adjusted output it has killed during the current recovery to a cumulative half a trillion dollars.