The revised second quarter U.S. government figures for change in the gross domestic product (GDP) came out this morning, and their trade highlights broadly confirm the picture painted in last month’s advance results: A significant sequential reduction in the inflation-adjusted U.S. trade deficit keyed by a jump in goods exports aimed at avoiding impending or threatened tariffs made an impressive contribution to a strong quarterly real growth rate.
As a result, the new data also left in place one of the biggest questions hanging over the second quarter’s performance: Will this trade boost to growth peter out?
The new results show that this export front-loading was fractionally smaller than first reported, with merchandise exports rising sequentially in the second quarter by 12.50 percent on an annualized basis, not the 12.64 percent initially estimated. Yet this increase was still the biggest since the 15.71 percent jump in the fourth quarter of 2013. The second quarter’s goods exports also still amounted to a new record: $1.8078 trillion annualized.
In addition, the quarterly drop in the combined goods and services trade deficit was steeper than originally reported. The gap, which stood at $902.4 billion annualized in the first quarter (the biggest such total since the $932.5 billion recorded in the third quarter of 2006), decreased to $843.5 billion in this year’s second quarter, not the $849.9 billion reported last month.
This sequential slide, moreover (26.01 percent annualized), was still the biggest since the 36.96 percent plunge in the fourth quarter of 2013.
Trade’s contribution to after-inflation second quarter growth remained solid in the revised figures, at 1.03 percentage points of 4.16 percent annualized growth. That was only marginally lower than the 1.04 percentage point contribution to the 4.00 annualized rate originally estimated.
Even better, the new second quarter results reduced the drag on economic growth that’s been exerted by the expansion of the trade deficit since the current economic recovery began in mid-2009.
As of the final GDP results for the first quarter of 2018, the trade shortfall’s increase had reduced cumulative price-adjusted growth during the expansion by $457.20 billion, or 14.33 percent. The first read on second quarter GDP reduced these figures to $404.70 billion, or twelve percent. This morning’s revision shrunk them further – to $398.50 billion, or 11.79 percent.
The same has held for the growth drag of the Made in Washington trade deficit – comprised of trade flows heavily affected by trade policy and trade agreements, and which therefore leaves out trade in oil and services.
The final first quarter GDP figures pegged this trade drag at 17.37 percent of cumulative real growth during the expansion – a $523.88 billion loss. According to this morning’s revised second quarter estimate, the Made in Washington deficit’s bite from real growth declined to 14.88 percent, or $502.90 billion.