(What’s Left of) Our Economy: New GDP Data Show that Trade is a U.S. Growth Killer

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energy trade, export doubling, growth GDP, Jobs, Obama, oil, recovery, Trade, trade agreements, trade deficit, {What's Left of) Our Economy

The fourth quarter 2014 GDP figures released this morning show that U.S. trade flows have slowed the nation’s economic recovery during the final three months of last year, for all of 2014, and since the current economic recovery began in mid-2009. Worse, these costs have been exacted despite major improvement in U.S. energy trade, meaning that the trade deficit strongly shaped by Obama-style trade agreements is the culprit. Although U.S. exports set new quarterly and annual records, so did America’s much greater import flows. The President’s export-doubling goal, meanwhile, has fallen more than 60 percent short of its target, with upcoming GDP revisions leaving no hope of significantly greater success. 

Here are the trade highlights from this morning’s GDP report:

>The initial fourth GDP 2014 figures show that the growth slowdown at the end of last year was spurred mainly by a rebound in the U.S. trade deficit to its highest level ($471.5 billion on an annualized basis) since the third quarter of 2010 ($498.4 billion).

>Whereas trade flows added 0.78 percentage points to the third quarter’s strong 5.00 percent annualized growth, they subtracted 1.02 percentage points from the fourth quarter’s 2.60 percent annualized figures.

>On a full-year basis, whereas a narrowing of the U.S. trade deficit added 0.22 percentage points to real GDP growth’s 2.20 percent growth in 2013, the gap’s widening subtracted 0.22 percentage points from last year’s 2.40 percent growth.

>2014 was the first year during which the trade deficit worsened, and therefore slowed growth, since 2011.

>Since the current economic recovery began in the middle of 2009, the trade deficit’s increase has cut cumulative real GDP growth by 5.38 percent – a price that was almost entirely paid by the U.S. private sector and its workers.

>Moreover, this trade deficit worsening has taken place despite the remarkable recent improvement in the nation’s energy trade. Data showing the full-year 2014 non-oil goods trade flows will be released next week.

>The non-oil goods trade data is especially important because these are the trade flows that are most strongly influenced by trade agreements and related policy decisions. The dramatic trade deficit worsening – and even greater GDP hit – sure to be revealed by the upcoming data strongly indicates that the new trade agreements being pushed by President Obama will further undercut growth, and by extension, job-creation.

>U.S. real exports are now up , moreover, are up only 37.98 percent since the first quarter of 2009. As a result, they have fallen way short of President Obama’s commitment to double them by the end of 2014. Future revisions cannot possibly upgrade this dismal performance significantly.

 

(What’s Left of) Our Economy: The New U.S. Growth Speed-up Took Place Despite Trade

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export doubling, exports, GDP, growth, imports, Obama, recovery, Trade, trade Deals, {What's Left of) Our Economy

Today’s final (for now) revision of the third quarter GDP figures show that the increase in estimated growth from the second revision’s 3.90 percent on a real annualized basis to 5.00 percent stemmed entirely from domestic developments. The trade deficit for the quarter was pegged at $431.4 billion annualized – slightly higher than the $431.0 billion in the second estimate, as both inflation-adjusted imports and exports were revised down marginally (though the latter remained at a new quarterly record). The final third quarter figure still shows that trade’s recovery role changed from a subtraction in the second quarter to a contribution in the third. But overall, trade flows have slowed the recovery by nearly 3.40 percent, and President Obama’s export doubling goal receded even further into fantasy land.

Here are the trade highlights from this morning’s GDP report:

>The final revision to third quarter GDP figures show that the major speed-up in growth reported in compared with the last set of changes took place despite the nation’s trade performance.

>Although this morning’s new Commerce Department report revised annualized third quarter real growth up from 3.90 percent to 5.00 percent on an annualized basis, it also showed that the trade deficit actually worsened a bit – from $431.00 billion to $431.40 billion annualized.

>This final trade deficit figure is nonetheless better than the $460.40 billion reported for the second quarter, and means that rather than slowing sequential growth by 7.39 percent, as in the second quarter, American trade flows generated 15.60 percent of the third quarter’s inflation-adjusted expansion. (The previous third quarter revision tabbed the trade contribution to the lower growth level at 20.00 percent.)

>As in every period during which trade adds to real growth, it achieves this goal without a single dollar of new budget deficit-boosting tax cuts or spending hikes. Indeed, since nearly all of this debt-free growth comes from the private sector, trade-generated growth strengthens American finances by increasing the nation’s level of taxable activity and thus reducing the national debt.

>These better U.S. trade flows, however, are completely unrelated to American trade deals and other trade policies. Instead, they stem entirely from the turnaround in U.S. energy trade.

>According to the U.S. Census Bureau’s separate monthly trade figures, from the recovery’s beginning in mid-2009 through this past September, the real U.S. oil trade deficit is down by nearly 50 percent on a monthly basis – from $16.62 billion to $8.56 billion. Yet during this period, the non-oil goods deficit – which is heavily influenced by U.S. trade policy – has more than doubled on a monthly basis, from $20.05 billion to $48.40 billion in September. That’s only slightly below the all-time high of $49.09 billion in May.

>Even including the gains from the energy revolution, U.S. trade flows have subtracted 3.40 percent from real U.S. growth since the recovery’s onset.

>Real U.S. exports for the third quarter were revised down for the second time this morning, but the new $2.1040 billion annualized figure is still a quarterly record. The previous estimate was $2.1057 billion.

>These exports are now 1.12 percent higher than the second quarter’s level, not the 1.90 percent initially reported for the third quarter.

>U.S. real exports, moreover, are up only 37.04 percent since the first quarter of 2009. As a result, they remain way short of President Obama’s commitment to double them by the end of 2014 – with only one data quarter left to achieve this goal.

>The new GDP figures pared third quarter GDP real import levels down from $2.5367 billion in the second estimate to $2.5353 billion – still just below the second quarter’s record annualized level of $2.5411 billion. Imports therefore fell sequentially by 0.23 percent in the third quarter, not the 0.43 percent first reported.

 

(What’s Left of) Our Economy: New GDP Figures Show Trade Just Slightly Less of a Disaster Area

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export doubling, exports, GDP, growth, imports, Jobs, Obama, Trade, {What's Left of) Our Economy

Today’s revised second quarter GDP figures show that U.S. trade remains a disaster area for the U.S. economy, but slightly less of one that the initial estimates indicated. Inflation-adjusted U.S. imports remained at record levels while the growing trade shortfall kept slowing the still subpar U.S. recovery, and keeps taking its greatest toll in the private sector. Meanwhile, the President’s export-doubling commitment looks more fanciful than ever, having achieved barely one-third of its goal with half a year left. Here are the highlights.

>The new GDP data for the second quarter reveal that the annualized inflation-adjusted U.S. trade deficit grew from the first quarter’s $447.2 billion to $463.5 billion, not the $470.3 billion first reported. Annualized real exports rose by 10.1 percent (rather than 9.5 percent) while imports grew by 11.0 percent (not 11.7 percent).

>Second quarter annualized real imports retreated from their originally estimated $2.5437 trillion, but at $2.5397 trillion still represented an all-time U.S. high – even though America’s inflation-adjusted oil imports continued their significant decline. The export total of $2.0762 trillion was revised upward from $2.0734 trillion, and still stands as the second highest total on record (after the $2.0765 trillion level hit in the fourth quarter of 2013).

>The new, narrower real trade deficit means that the trade shortfall’s drag on second quarter growth fell from 0.61 to 0.43 percentage points. The trade drag in the weather-affected first quarter was 1.66 percentage points – the largest ever for a non-recessionary quarter.

>Nonetheless, the trade deficit’s widening from $366.3 billion in the second quarter of 2009 means that worsening trade flows have reduced the American economy’s cumulative growth during the current economic recovery by 5.93 percent. Nearly all this damage, moreover, has come in the private sector.

>Doubtless greater still has been the growth-killing impact of U.S. trade flows affected heavily by trade agreements and other American trade policy decisions, since these new quarterly figures, as indicated above, also include a dramatically shrinking trade shortfall in energy products.

>A more complete analysis of the impact of trade policy on economic growth will be possible next week, when the July monthly trade figures are released. The prior June figures, however, revealed that the policy-driven trade deficit fell off from its May level of $49.04 billion (an all-time record) to a still high $46.73 billion in June.

>The new GDP figures also make clearer than ever the hubris of President Obama’s export-doubling goal. Mr. Obama believed that his efforts could help America’s overseas sales rise by 100 percent between the first quarter of 2009 (when he began his presidency) through the end of 2014. With 2014 now half completed in a data sense, real U.S. exports during this period are up only 35.23 percent.