(What’s Left of) Our Economy: A Major Virus-Related U.S. Economy Hit Confirmed – With Much Worse Numbers Sure to Come

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CCP Virus, coronavirus, COVID 19, exports, GDP, goods, Great Recession, gross domestic product, imports, inflation-adjusted output, lockdown, real exports, real GDP, real imports, recession, services, shutdown, Wuhan virus, {What's Left of) Our Economy

This is a catch-up post on the CCP Virus-induced contraction of the U.S. economy growth, as well as a report on today’s latest update from the Commerce Department. The big news this morning: During the first quarter of this year, the economy’s sequential shrinkage for the first quarter of this year was pegged in this morning’s third, and final (for now) estimate at 5.09 percent at an annual rate in inflation-adjusted terms. That compares with the 4.87 percent drop in real output recorded in the first estimate, and a 5.15 percent decline estimated in the second estimate, which yours truly missed when it came out last month.

So things economic are looking slightly less terrible than previously thought – but still pretty terrible. In fact, this first quarter economic downturn was America’s most severe since the fourth quarter of 2008’s 8.66 percent – when the Great Recession spurred by the financial crisis was at its low point.

And there’s no doubt much worse to come in the second quarter figures, whose initial release will be a month from now (along with a regularly scheduled revision of all the data on the gross domestic product [GDP] and its changes going back to 2015). After all, the first quarter numbers only include the first month (March) during which the CCP Virus and its growth-killing effects began to be fully suffered.

Before delving into the trade-related details, a cautionary/explanatory note should be repeated: The phrases “at an annual rate” and “annualized” mean that an economic contraction of this historic scale didn’t take place al at once. Instead, they mean that in the economy contracted at a rate that would add up to the current 5.09 percent if the shrinkage continued at this pace for an entire year. This qualification is especially important because of the tremendous expected worsening of the slump in the second quarter.

Today’s GDP report revealed that the after-nflation annualized combined goods and services trade deficit during the first quarter was $815.5 billion. That’s a bit worse than the $816.0 billion figure reported last month but a bit better than the $817.4 billion calculated in the first estimate. And this so-far-final number represents a 9.34 percent decline from the $900.7 billion level reported for the fourth quarter of last year.

These results leave the drop-off the steepest since the 18.13 percent quarter-to-quarter nosedive during the second quarter of Great Recession-y 2009. And because the gap between these two results remains so big, it will be fascinating to see the numbers for the second quarter, when impact of mandated shutdown of much of the economy will first become apparent.

The quarterly decrease in total real exports for the first quarter is now judged to be 2.33 percent (non-annualized – as are the following numbers). This decline is worse than that estimated in the two previous first quarter GDP reports (2.24 percent and 2.25 percent, respectively). But as with the trade deficit figures, this slump pales with that suffered the last time constant dollar goods and services exports dropped significantly – the 8.08 percent crash dive during the first quarter of 2009, during the depths of that Great Recession.

On the import side, the 4.17 percent sequential price-adjusted fall-off reported this morning was bigger than either the 4.12 percent decrease previously judged and the 4.08 percent initially estimated. Again, however, that was the biggest such decline since a Great Recession result that was much greater – the 9.88 percent recorded in the first quarter of 2009.

The “final” first quarter figure for the inflation-adjusted goods deficit ($996.8 billion annualized) was 7.64 percent lower than the fourth quarter figure. But in services, the real surplus widened by 1.22 percent – even though the super-sector’s exports plummeted by nine percent. The first quarter annualized total of $714.9 billion annualized was the meagerest since the $706.2 billion level for the fourth quarter of 2013, and the rate of decline (much greater than the 0.49 percent in goods exports) was the fastest ever in a data series going back to 2002. In fact, the previous record was only 2.95 percent (during the Great Recession-y first quarter of 2009) – as with the export figures underscoring the outsized impact of the CCP virus’ impact on the travel industry.

Similar trends can be seen in after-inflation services imports. which sank by a record 8.06 percent in the quarter – much faster than the 3.19 percent fall in goods imports.

(What’s Left of) Our Economy: Through the Looking Glass With the New US GDP Report?

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CCP Virus, coronavirus, COVID 19, durable goods, exports, GDP, goods, Great Depression, Great Recession, gross domestic product, imports, inflation-adjusted growth, non-durable goods, oil, real GDP, real trade deficit, services, trade deficit, Wuhan virus, {What's Left of) Our Economy

Today’s U.S. government report on the shrinkage of the American gross domestic product (GDP) in the first quarter of the year is fascinating not because it can provide any idea about how bad the CCP Virus-induced economic downturn is right now, much less how bad it will get. Instead, it’s fascinating because it provides (and confirms) some insights on which sectors of the economy have been the biggest winners and losers, and which could fare best and worst going forward.

First, a vitally important explanatory point: When you read that the economy contracted by 4.8 percent between the last three months of 2019 and the first three months of 2020 after factoring in inflation, remember that this figure is an annualized figure. That is, it doesn’t mean that the nation’s output of goods and services (the definition of GDP) fell by that amount all at once during the first quarter. It means that if the contraction that did occur continued at the same pace over the course of a full year, the cumulative drop would add up to 4.8 percent. (NB: The real decline was 4.87 percent, even though the Commerce Department rounded it down to 4.8 for some reason.)

The same cautionary note goes for all the terrifying predictions for the second quarter in particular, to the effect that inflation-adjusted GDP would plummet by 20 percent of 30 percent. They’re annualized rates, too.

No doubt about it – even the new annualized numbers are terrible. (And unless otherwise specified, all the following statistics will represent sequential – i.e., quarter-to-quarter – rates of change.) That’s not because they’re the worst that Americans have seen lately. That dubious honor goes to the fourth quarter of 2008, during the Great Recession, when real GDP sank at an 8.66 percent annual rate. Instead, it’s because the main shutdowns of business didn’t start until mid-March. Since the first quarter ended on March 31, a genuinely appalling amount of damage took place in a very short period of time.

As a result, surely the numbers for the second quarter will be much worse, as the lockdowns themselves spread for weeks thereafter, and their effects have had time to sink in (even though the second quarter figures presumably will reflect some of the cautious easing and reopening that’s begun). Also possibly leading to more depressing future results: Today’s first quarter figures are the first of three reports for the first quarter we’ll be getting this year. As Washington gathers more complete information, the reported nosedive could well get steeper.

The principal ray of hope comes in the nature of the downturn. It was literally ordered by America’s national, state, and local governments. Whatever recession or depression that’s begun says little about the fundamentals of the economy pre-virus – unlike typical recessions, which result from weaknesses in expansions that for various reasons finally come to light, or are brought to light by the Federal Reserve (in many cases) – which in modern times, has reacted to signs of economic excesses (like accelerating inflation), by raising interest rates (that is, increasing the cost of borrowing for everyone) and trying to bring price changes back under control. (And yes, a big exception was the Fed’s record during the previous, so-called Bubble Decade, when its principal aim seemed to be to juice growth at all costs – in that case, at the risk of scary degrees of financial instability.)

All the same, the biological roots of this economic slump create great uncertainties about the rate of recovery, since no one can know how quickly Americans will return to patronizing service sector business in particular, which comprise the vast bulk of the economy, and so many of which largely serve customers in person.

In that vein, it’s more than a little interesting that output in services shrank in the first quarter at a much faster annual rate (10.63 percent) than goods output (1.35 percent). Dig a little deeper, though, and you see that the numbers for goods are sharply divided. After-inflation output of durables (products supposed to last for three years or more either in use or on the shelf – like autos and appliances) plunged by 17.12 percent at annual rates. But constant dollar production of non-durables (notably processed food but also chemicals and paper and textile and plastics and others) actually increased – by 6.77 percent.

Those goods and services figures are contained in the “personal consumption expenditures” category of each GDP report. And overall, such consumption dropped by 7.78 percent annualized in the first quarter. Notably, that’s a much worse result than anything seen during the last, Great, recession (which, by the way, was the previous deepest economic slump experienced in the United States since the Great Depression of the 1930s). During that most recent downturn, personal spending’s decrease bottomed out with a 3.72 percent annualized fall in the fourth quarter of 2008.

No – to get to a worse consumption figure than just recorded, you need to go all the way back to the second quarter of 1980, during a horrible period marked by a painful recession and roaring inflation partly produced by sharp oil price increases. Then, such spending cratered at a 9.01 percent annual rate, and the entire economy shrank by 8.23 percent annualized.

Of course, the American economy entails more than just personal consumption (although, as known by RealityChek regulars, such spending represented a big majority of all economic activity– 69.27 percent of real GDP at present – even after the big decreases in the first quarter). Business investment amounted to 14.03 percent of GDP after inflation, and its levels were off considerably, too, in the first quarter – by 8.92 percent.

No doubt, that’s going to worsen, since the lower personal spending, as well as the lower business spending itself, mean that so many businesses will be short of customers for the time being. Even so, the Great Recession numbers were much worse. From the fourth quarter of 2008 through the second quarter of 2009, this “non-residential fixed investment” tumbled at double-digit quarterly rates, with the bottom coming during the first quarter of 2009 (a 30.14 percent plummet!).

And what about America’s trade performance? The constant dollar trade deficit narrowed by 9.25 percent – from $900.7 billion (again, that’s an annualized figure) to $817.4 billion. That deficit number is the lowest quarterly figure since the $761.4 billion recorded in the fourth quarter of 2016. Yet the rate of decrease was almost matched by that of the fourth quarter of last year (9.03 percent). To find a comparable result, you’d have to go back to the fourth quarter of 2013 (9.24 percent).

One big question: How much of this latest drop was due to oil? We know that the general answer is “a lot” – even though in principle these results take into account (i.e., factor out) the recent crash in oil prices. Nonetheless, a dramatically slowed U.S. economy is going to consume less oil overall (ditto for a recessed global economy, something to ponder since the United States is now an oil exporter). So we’ll need to look at the volume numbers and then compare them with those of previous quarters when the trade deficit dropped significantly for a fuller picture.

What is clear so far, though – in terms of the real overall trade deficit, the first quarter 2020 decline pales before those experienced during the Great Recession. In particular, the real trade gap decreased by 15.08 percent annualized during the first quarter of 2009 and by 18.13 percent during the following quarter.

In line with the consumption findings, moreover, services trade performed worse than (the much greater amount of) goods trade. The goods deficit was 7.39 percent narrower in the first quarter of 2020 ($0.9995 trillion annualized) than during the fourth quarter of 2019 ($1.0792 trillion annualized). But the services surplus rose by only 2.07 percent (from $188.2 billion annualized to $192.1 billion).

Especially revealing were the import and export findings. For goods, exports were off by only 0.30 percent – from $1.7823 trillion annualized to $1.7769 trillion. But for services, they dropped by 5.85 percent (from $758.6 billion annualized to $714.2 billion).

The services export and imports decreases were the biggest on record – by far. And although figures only go back to the first quarter of 2002, can anyone seriously doubt that these results reflect the numerous international travel bans sparked by the United States – and so many other countries?

Because services play such a predominant role in the economy, and because services that need to be delivered in person, like dining out and travel, represent such big shares of the economy (just short of 3.25 percent of all private sector output for restaurants, bars, and lodging places alone as of late 2019, and a much bigger 11.06 percent of the private sector workforce), it seems reasonable at this point to expect these sectors to keep taking particularly powerful blows at least as long as the virus remains a pandemic.   

(What’s Left of) Our Economy: US Growth Remains Solid Despite a Notable Boeing Drag

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Boeing, exports, GDP, General Motors strike, goods, gross domestic product, imports, real GDP, real trade deficit, services, Trade, trade deficit, {What's Left of) Our Economy

This morning’s first official read on U.S. economic growth in the third quarter not only beat expectations. Inflation-adjusted gross domestic product (GDP) expanded nicely despite potholes dug by the General Motors strike and Boeing’s ongoing safety woes.

Bad news wasn’t entirely absent, especially from a trade policy standpoint, as the overall U.S. trade gap edged up to a new record in absolute terms. But even here, mitigating circumstances can be cited – namely, foreign reluctance to purchase Boeing planes, which surely weighed on exports, and tariff front-running sparked by importers’ desire to buy products from China in particular to beat the imposition of threatened tariffs.

The third quarter’s 1.91 percent annualized increase in real GDP – the first of three near-term growth figures that will be issued – handily surpassed the latest 1.6 percent consensus of the forecasts tracked by CNBC and Moody’s Analytics. Moreover, the Boeing effect looks anything but negligible. As noted by Harvard University economist Megan Greene, the Trump administration believes that the aerospace giant’s troubles cut 0.40 percentage points from third quarter GDP, and private sector economists peg the cost at 0.25 percentage points.

The real trade deficit, however, was clearly no help. It wasn’t nearly as big a drag on inflation-adjusted growth as in the second quarter (when it subtracted 0.68 percentage points from that two percent annualized constant dollar expansion). But it still depressed the third quarter’s real growth by 0.08 percentage points – and edged up by 0.58 percent to a new record $986.4 billion on an annual basis. (The previous all-time high was the $983.0 billion level reached in the fourth quarter of 2018).

This after-inflation trade deficit as a share of the entire economy stayed virtually unchanged from quarter to quarter – at 5.16 percent. But these are the kinds of levels that haven’t been seen since late during the last, bubble-decade expansion (in the third quarter of 2007). Their only saving grace is that they’re still well off the current record of 6.10 percent of GDP, also set during that bubble decade (in the third quarter of 2005).  Nonetheless, the Boeing effect shouldn’t be discounted here, either, as demonstrated in my recent RealityChek post. 

As for other trade-related highlights of the new GDP report:

>Total annualized real exports increased by 0.19 percent, from $2.5175 trillion in the second quarter to $2.5222 trillion.

>Inflation-adjusted goods exports rose at a somewhat faster rate – 0.39 percent sequentially, from $1.7753 trillion to $1.7823 trillion.

>Constant dollar services exports fell on-quarter for the second straight quarter – from $748 billion annualized to $746.3 billion. That total was their lowest since the second quarter of 2017’s $740.7 billion.

>Combined after-inflation goods and services imports were up by 0.29 percent, from $3.4982 trillion annualized to $3.5085 trillion – the second highest total on record after the $3.5116 trillion record in the fourth quarter of 2018.

>Constant dollar goods imports inched up by 0.11 percent sequentially, from $2.9417 trillion annualized to $2.9450 trillion.

>Inflation-adjusted services imports rose quarter to quarter from $557.2 billion annualized to $563.2 billion. That total represents a new record, surpassing the previous all-time high of $558.1 billion set in the first quarter of this year.

(What’s Left of) Our Economy: The Wrong Kinds of Records Revealed in October’s U.S. Trade Figures

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China, exports, goods, imports, manufacturing, services, Trade, Trade Deficits, trade war, {What's Left of) Our Economy

October was a month of records, this morning’s U.S. trade figures revealed – and the most noteworthy weren’t the good kind.

All-time highs in two intertwined trade gaps in the news lately stand out: in U.S. goods trade with China, and in manufacturing trade.

October’s U.S. merchandise trade deficit with China hit its fourth straight monthly high – $43.10 billion. And the 7.11 percent sequential increase seemed largely to reflect continued evidence of importers striving to keep ahead of looming tariff increases promised by President Trump (and only partly and temporarily headed off by this past weekend’s announcement of a bilateral trade truce). American purchases of goods hit their second straight monthly record – $52.23 billion.

The story on the goods exports side reflected trade war-related developments as well, as U.S. merchandise sales to China slumped 6.73 percent sequentially, to $9.13 billion – their lowest level since August, 2016 ($9.37 billion).

On a year-to-date basis, American goods imports to China are up 8.26 percent, while exports have dipped by 0.96 percent. As a result, the merchandise trade deficit is running 11.38 percent of last year’s record pace, and with two data months left in this year, a new all-time high seems certain.

U.S. manufacturing trade, which is strongly influenced by U.S.-China trade, in October recorded its first monthly trade deficit topping $100 billion. The $102.11 billion gap represented a strong 18.95 percent increase from September’s $85.84 billion total, and exceeded the previous record of $92.51 billion (set in August) by 10.38 percent.

On a monthly basis, manufactures exports rose by 3.37 percent, from $97.18 billion to $100.44 billion. But imports surged by 10.67 percent, from $183.02 billion to $202.54 billion.

Year-to-date, the manufacturing trade shortfall is up 11.93 percent, from $761.44 billion to $852.31, and as a result, seems sure to hit the $1 trillion mark this year for the first time.

Manufacturing exports so far have increased by 6.65 percent between the first ten months of last year and the first ten months of this year. But the much greater amount of manufacturing imports has swelled by 9.06 percent.

The combined U.S. goods and services October trade deficit of $55.49 billion represented only a 1.71 percent increase from September’s upwardly revised figure of $54.56 billion. But the October total was the highest yet during the current economic recovery – eclipsing the $54.96 billion level of this past February.

The goods deficit, meanwhile, hit its all-time high in October ($78.11 billion), topping the previous record of $77.63 billion set in July, 2008 – shortly after the start of the last recession.

Overall October U.S. imports of $266.53 billion were a new record, too. Oddly, they came in below September’s previously reported $266.58 billion, but that number was revised down this morning.

Also at all-time records in October were U.S. goods imports ($219.59 billion) and services imports ($46.95 billion).

Year-to-date, the combined goods and services trade deficit is up 11.36 percent over last year’s January-October total. Total exports are up 7.68 percent but total imports have climbed by 8.38 percent.

(What’s Left of) Our Economy: Trade was a Marginal Growth Engine in the Second Quarter

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Bureau of Economic Analysis, Commerce Department, exports, GDP, goods, gross domestic product, imports, inflation-adjusted growth, Made in Washington trade deficit, real GDP, real trade deficit, recovery, services, trade deficit, {What's Left of) Our Economy

The final (for now) solid 3.03 percent annualized real GDP growth figure for the second quarter benefited slightly on a sequential basis by a drop in the inflation-adjusted trade deficit to $613.6 billion – the lowest such level since the third quarter of 2016 ($557.3 billion). Trade’s role as a quarterly growth engine, however (adding 0.21 percentage points) decreased to its smallest on a relative basis since the third quarter of 2014 (when its fueled 0.28 percentage points of 5.11 percent annualized growth).

New quarterly constant-dollar records were all achieved for total exports and goods exports, and for all import categories. For total imports and goods imports, these records were their fifth straight. Real services exports increased sequentially at their fastest annualized rate (6.2 percent) since the first quarter of 2013 (7.1 percent). But services imports hit their eleventh straight quarterly record ($498.2 billion).

Trade’s subtraction from cumulative recovery-era real growth remained considerable in the second quarter, but shrank sequentially both in toto (from 10.04 percent in the first quarter to 9.24 percent) and in terms of the Made in Washington deficit that tracks trade flows heavily influenced by trade policy (from 17.40 percent to 17.30 percent).

Here are the trade highlights from Thursday morning’s GDP report from the Commerce Department’s Bureau of Economic Analysis:

>The final read on second quarter economic growth produced an unusual mix of results given all the attention focused on President Trump’s stated resolve to reform U.S. trade policy. On the one hand, a sequential drop in the inflation-adjusted trade deficit to $613.6 billion (its lowest level since the $557.3 billion in the third quarter of 2016) helped lift annualized quarterly growth to 3.03 percent – the best such result since the first quarter of 2015 (3.20 percent).

>On the other hand, trade’s positive contribution to growth was its smallest on a relative basis (adding 0.21 percentage points) since the third quarter of 2014 (0.28 percentage points out of 5.11 percent annualized real growth).

>On a stand-still basis, new quarterly records were set for nearly all after-inflation categories of trade flows, including across the board on imports.

>Real total exports increased by 3.48 percent sequentially at an annual rate, from $2.1623 trillion annualized to $2.1811 trillion – their second straight all-time high.

>Real goods exports also hit their second straight quarterly record, improving by 2.17 percent annualized, from $1.4923 trillion annualized in the first quarter to $1.5004 trillion.

>Real services exports rose quarter-to-quarter at their fastest annual rate (6.01 percent) since the first quarter of 2013 (6.86 percent). But their $682.3 billion total fell short of the record of $684.9 billion set in the second quarter of 2015.

>Real combined goods and services imports in the second quarter rose sequentially at their slowest annualized rate (1.48 percent) since the second quarter of 2016 (0.39 percent). But their $2.7948 trillion figure was still their fifth straight quarterly record.

>Real goods imports set their fifth straight quarterly record, too. They rose by just 1.33 percent on an annual basis (the slowest pace since the third quarter of 2016’s 1.23 percent) to hit $2.7948 trillion annualized.

>As for real services imports, they set their eleventh straight quarterly record ($498.2 billion) – even though they advanced by a mere 2.18 percent annualized (the slowest such pace since the 1.01 percent annual growth in the second quarter of 2016).

>The new GDP figures showed that trade kept subtracting from America’s cumulative growth during te current economic recovery, but that the growth drag lightened by both major measures.

>As of these final second quarter results, the increase in the inflation-adjusted trade deficit since the second quarter of 2009 (when the recovery officially began) has sliced $247.3 billion from the real gross domestic product’s improvement – a growth drag of 9.24 percent.

>As of the first quarter, this growth drag was 10.04 percent, or $255.9 billion.

>The bite into growth from the Made in Washington trade deficit’s increase was much greater, but diminished as well.

>The post-second quarter, 2009 widening in this trade deficit – which strips out trade in energy and services and focuses on import and export flows heavily influenced by trade policy – cost the economy $462.8 billion, resulting in a growth drag of 17.30 percent.

>The Made in Washington trade deficit’s growth drag in the first quarter was 17.40 percent, or $443.3 billion.

(What’s Left of) Our Economy: Again, A Better U.S. Trade Performance Produces More Growth

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Bureau of Economic Analusis, Census Bureau, Commerce Department, exports, GDP, goods, Great Recession, gross domestic product, imports, Made in Washington trade deficit, real GDP, real trade deficit, recovery, services, Trade, {What's Left of) Our Economy

Sorry for being late with this analysis of the federal government’s final (for now) report on economic growth in the first quarter – which came out on Thursday. Life has this stubborn habit of intruding, etc. But the results are worth considering because they show once again that, even though the intertwined economics, business, and political establishments insist otherwise, a smaller trade deficit is usually better for the domestic economy, and especially for its productive side (the key to sustainable prosperity). Here’s a somewhat abbreviated version of the highlights:

>The government’s third report on the gross domestic product (GDP) showed that the downward revision of the first quarter’s inflation-adjusted trade deficit from $600 billion to $595.6 billion boosted trade’s contribution to growth – though it wasn’t big enough to prevent overall performance from weakening sequentially.

>The previous GDP report estimated that real net trade contributed 0.13 percentage points to the first quarter’s 1.15 percent annualized price-adjusted sequential growth. Now the quarter-to-quarter narrowing of the after-inflation trade deficit added 0.23 percentage points to 1.42 percent annualized constant dollar growth.

>And the first quarter’s trade role was a stunning turnaround from the fourth quarter’s. The final results for that period show that a jump in the real trade deficit subtracted 1.82 percentage points from 2.06 percent annualized growth. That is, a worse trade performance cut inflation-adjusted growth nearly in half.

>In fact, that difference produced the biggest positive swing in trade’s pro-growth role (of 2.05 percentage points) since the first quarter of 2009 (2.15 percentage points). At that time, the economy was in the depths of the Great Recession, when the economy, and contracting at a sickening 5.4 percent annual rate.

>At the same time, the newest $595.6 billion quarterly trade gap was still the second largest since the $623.7 billion deficit registered in the first quarter of 2008, as the economy was just starting to fall into recession.

>All categories of exports and imports tracked in the real GDP figures remained at new quarterly all-time highs in the first quarter. And with the exception of services exports, all categories exceeded the results from the previous GDP report.

>Combined annualized goods and services exports in the first quarter were upgraded from their record $2.168 trillion to $2.1740 trillion – and are now judged to be 1.71 percent higher than the fourth quarter’s level. The previous quarterly all-time high had been $2.1620 trillion annualized, set in the third quarter of last year.

>The record annualized goods export total was revised up from 1.4832 trillion to $1.4904 trillion – an increase of 2.53 percent over the fourth quarter. The previous record of $1.4792 trillion was also set in third quarter, 2016.

>Services exports were revised down from $685.8 billion annualized to $685.0 billion. That amount still exceeded the fourth quarter total by 0.18 percent, and still topped the previous record of $684 billion record set in the first quarter of 2015.

>Total annualized first quarter imports were revised slightly higher, from a record $2.7679 trillion annualized to $2.7696 trillion – one percent greater than the $2.7424 trillion fourth quarter level that was the previous record.

>Goods imports also were revised up fractionally, from $2.2782 trillion to $2.2792 trillion annualized. That represented a 1.08 percent increase over the fourth quarter level of $2.2549 trillion – also the previous record.

>Services imports were reported last month at their eighth straight quarterly record., and they remained so in today’s report. The previous $487.4 billion is now judged to be $488.1 billion – a 0.62 percent sequential increase.

>According to these new GDP figures, the trade drag on the current, historically weak, economic recovery continued to shrink. Initially coming in at 9.70 percent, it was revised down to 9.32 percent last month and in the third estimate equaled 9.11 percent. The total as of the fourth quarter was 9.71 percent. The new data mean that the economy has grown by $229.3 billion less in real terms during the recovery due to the increase in the real trade deficit.

>The trade drag created by the Made in Washington deficit is still more than twice as great, according to the GDP data (which comes from the Commerce Department’s Bureau of Economic Analysis) and separate figures compiled by the Census Bureau (another arm of Commerce). And it’s bounced back up as of the latest data from both sources.

>This deficit strips out U.S. trade in oil (which is rarely the subject of trade deals or related policy decisions) and services (where liberalization has made relatively little progress). The growth of the remaining real non-oil goods deficit during the current recovery has slowed cumulative inflation adjusted growth by fully 21.52 percent – slightly higher than the 21.26 percent produced by the previous set of results.

>And it mean that the growth of this policy-influenced trade deficit has cost the U.S. economy nearlyy $542 billion in cumulative inflation-adjusted production during this recovery.

(What’s Left of) Our Economy: New U.S. GDP Report Shows Slight Trade Deficit Drop but Heavy Growth Drag

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economic growth, exports, GDP, goods, gross domestic product, imports, inflation-adjusted growth, real trade deficii, recession, recovery, services, Trade, trade deficit, {What's Left of) Our Economy

The government’s initial figures for first quarter gross domestic product (GDP) revealed that a slight sequential dip in the U.S. real trade deficit boosted inflation-adjusted growth only fractionally in early 2017. Yet the decline also resulted in the biggest positive sequential swing in trade’s contribution to quarterly growth first quarter (1.89 percentage points) since the fourth quarter of 2010 (1.95 percentage points). Nonetheless, the first quarter’s constant dollar trade deficit ($602.7 billion) was still the second biggest quarterly total since the $623.7 billion run up in the first quarter of 2008, just after the last recession officially began.

These advance first quarter figures show that all of the major categories of after-inflation exports and imports reached new quarterly records, including total goods and services exports ($2.1675 trillion), goods exports ($1.482.8 trillion), services exports ($685.8 billion), total goods and services imports ($2.7703 trillion), goods imports ($2.2797 trillion), and services imports ($488.3 billion). The cumulative growth drag created by the real trade deficit’s increase during the current, historically feeble economic recovery totaled 9.70 percent in the first quarter – down slightly from the 9.71 percent hit in the fourth quarter of 2016. This translates into $239.4 billion in lost real economic expansion. The Made in Washington trade drag – calculated from separate Census figures that isolate trade flows heavily influenced by trade policy – has been much greater. The latest data, which run through the fourth quarter of 2016, reveal it as having reached 21.67 percent, or $532.56 billion in lost growth.

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

>The government’s first look at first quarter U.S. gross domestic product (GDP) showed that a slight (0.38 percent) sequential dip in the inflation-adjusted trade deficit boosted the period’s modest (0.69 percent annualized) economic growth by a scant 0.07 percentage points.

>At the same time, this marginal lift resulted in the biggest positive quarterly swing in trade’s impact on economic growth (from a 1.82 percentage point reduction to that 0.07 percentage point increase, or a 1.89 percentage point shift) since the last quarter of 2010 – when trade flipped from subtracting 0.83 percentage points from real expansion to adding 1.12 percentage points (a 1.95 percentage point shift).

>The sequential decrease in the real trade deficit, from $605 billion annualized in the fourth quarter to $602.7 billion annualized in the first still left the shortfall at its second highest quarterly level since the first three months of 2008. At that time, just after the last recession officially broke out, the gap hit $623.7 billion.

>All categories of exports and imports tracked in the real GDP figures hit new quarterly records in the first quarter.

>Combined goods and services exports rose on-quarter by 1.41 percent, to $2.1675 trillion annualized. That broke the previous record of $2.1620 trillion annualized, set in the third quarter of last year.

>Goods exports alone increased by 2.01 percent, to $1.4828 trillion annualized – marginally better than the previous record of $1.4792 trillion, also set in third quarter, 2016.

>Services exports inched up by a mere 0.29 percent, to $685.8 billion annualized. That performance bested the old $684 billion record set in the first quarter of 2015.

>Total imports climbed by 1.01 percent, to $2.7703 trillion annualized – their second straight all-time high.

>Goods imports also set a second straight quarterly record, with the first quarter’s $2.2797 billion total annualized besting the fourth quarter’s by 1.10 percent.

>Services imports set their eighth straight quarterly record. The first quarter’s $488.3 billion annualized level was up 0.66 percent from the fourth quarter’s total.

>According to these new GDP figures, the trade drag on the current, historically weak, economic recovery fell slightly on a sequential basis – from 9.71 percent to 9.70 percent. That is, increase in the real trade deficit during the current expansion has reduced its cumulative growth by 239.4 billion.

>Yet the trade drag created by the Made in Washington deficit is now more than twice as great, according to the GDP data and separate figures compiled by the Census Bureau.

>This deficit strips out U.S. trade in oil (which is rarely the subject of trade deals or related policy decisions) and services (where liberalization has made relatively little progress). The growth of the remaining real non-oil goods deficit during the current recovery has slowed cumulative inflation adjusted growth by fully 21.67 percent, or $536.52 billion.

(What’s Left of) Our Economy: New GDP Figures Reveal Record, Growth-Killing Jump in Real Trade Deficit in Late-2016

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exports, GDP, goods, Great Recession, gross domestic product, growth, imports, inflation-adjusted growth, Made in Washington trade deficit, non-oil goods trade deficit, real GDP, real trade deficit, recovery, services, trade deficit, {What's Left of) Our Economy

The government’s third and final (for now) figures for fourth quarter and full-year 2016 gross domestic product (GDP) revealed that the U.S. real trade deficit recorded its biggest quarterly increase since these figures have been tracked (15.86 percent). Worse, trade took its greatest absolute toll on inflation-adjusted quarterly growth (1.82 percent out of a 2.06 percent annualized increase) since the second quarter of 2004 (1.84 percent out of a 2.93 percent annualized increase).

The new GDP report also showed that, from quarter to quarter, the cumulative trade drag on the current, feeble American recovery rose from 6.57 percent to 9.71 percent. Separate Census figures show that, through 2016, the growth of the Made in Washington trade shortfall (which strips out energy and services) slowed growth by almost twice as much (17.64 percent).

The record fourth quarter real trade deficit per se was revised up from a record $599.6 billion annualized to $605 billion – and remained the biggest such gap since the first quarter of 2008, in the aftermath of the recession’ onset. Meanwhile, the annual 2016 trade deficit was revised up from $561.6 billion to $563 billion – the highest total since 2007.

Quarterly services exports after inflation were revised down from a record $685.5 billion annualized to a non-record $683.8 billion, but the import figure was revised up to set a new record – $485.1 billion annualized. Quarterly total imports and goods import totals were revised up from newly set records – to $2.7424 trillion and $2.2549 trillion annualized, respectively.

All annual real import categories saw previously reported annual record totals revised higher. Annual combined goods and services exports remained at all-time highs, but were revised down slightly to $2.1282 trillion annualized. All annual import categories, which set new quarterly records in late 2016, saw those numbers revised higher – to $2.6912 trillion for combined goods and services imports; to $2.2101 trillion for goods imports; and to $478.7 billion for services imports.

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

>The new and final (pending the next benchmark revision) fourth quarter and full-year 2016 GDP report made clear that the end of last year saw an even worse American trade performance – dominated by the wrong kinds of records and multi-year worsts – than reported in the previous estimate. And the main victim was the U.S. economy and its still-feeble recovery.

>The sequential jump in the inflation-adjusted trade deficit was revised upward from 14.82 percent to 15.86 percent – the worst such deterioration since the Commerce Department began presenting this figure in 1999.

>As a result, the bite taken by the real trade deficit’s latest sequential growth (1.82 percentage points out of a 2.06 percent annualized real expansion) was the biggest in absolute terms since the second quarter of 2004, when trade subtracted 1.84 percentage points from annualized growth of 2.93 percent.

>The new figures mean that as of the end of 2016, trade had reduced the U.S. economy’s real cumulative growth during the current recovery by 9.71 percent, or $238.7 billion. As of the end of the third quarter, the drag was 6.57 percent.

>Separate figures from the Census Bureau show much greater damage has been inflicted on the economy by a different set of U.S. trade flows – constant-dollar imports and exports minus energy and services, which have not been significantly affected by American trade agreements and similar policy decisions. The rapid growth of the inflation-adjusted American trade deficit stripping out these two sectors – which has been Made in Washington – has slowed cumulative U.S. growth during this recovery by fully 17.64 percent, or $433.43 billion.

>The fourth quarter after-inflation trade deficit was revised up from $599.6 billion annualized to $605 billion – still the highest such total since the first quarter of 2008 ($623.7 billion), shortly after the Great Recession began.

>The full-year 2016 trade deficit was revised up from $561.6 billion after inflation to $563 billion. That represented the highest annual real trade deficit since 2007 ($712.6 billion) – the last pre-recession year – and a 3.68 percent rise from 2015’s $540 billion.

>This morning’s trade figures showed that one real export record reported in the previous GDP estimate is now gone: Quarterly price-adjusted services exports were revised down from $685.5 billion to $683.8 billion – still the third best total on record.

>Unfortunately, after-inflation services imports hit their own new all-time high, as their fourth quarter total was revised up from $483.9 billion annualized to $485.1 billion.

>New quarterly records reported in the previous estimate for two import categories – total imports and goods imports – were both revised even higher this morning. The former total increased from $2.7935 trillion annualized to $2.7424 trillion, while the latter were upgraded from $2.2533 trillion annualized to $2.2549 trillion.

>Annually, inflation-adjusted 2016 goods and services exports remained at a record, as reported in the previous GDP estimate. But the figure was revised down slightly from $2.1399 trillion to $2.1282 trillion. As a result, the annual increase is now 0.36 percent.

>New records were augmented in all import categories. Combined goods and services imports were judged this morning to be $2.6912 trillion instead of $2.6901 trillion. As a result, the 2016 annual increase was 1.15 percent.

>Real goods imports in 2016 were revised up from $2.2097 trillion to $2.2101 trillion. As a result, the annual increase was 0.73 percent.

>Real services imports last year are now pegged at $478.7 billion, not $478.3 billion. As a result, the annual increase was 3.08 percent.

>Estimates were also raised for the real trade deficit’s share of the economy. Previously estimated at 3.57 percent of real GDP for the fourth quarter, the new figure is now 3.60 percent. That’s the highest level since the fourth quarter of 2008 (3.64 percent).

>For all of 2016, the real trade deficit is now judged to be 3.38 percent instead of 3.37 percent. That’s the highest level since 2008 (3.76 percent).

(What’s Left of) Our Economy: No News isn’t Good News on Trade and U.S. Economic Growth

Tags

exports, GDP, goods, gross domestic product, imports, inflation, Made in Washington trade deficit, non-oil goods deficit, real GDP, real trade deficit, recovery, services, Trade, trade deficit, {What's Left of) Our Economy

The government’s second figures for fourth quarter and full-year 2016 gross domestic product (GDP) confirmed the dismal trade results reported in last month’s initial reading. The real annualized trade deficit still recorded its biggest relatively quarterly jump (14.82 percent) since the second quarter of 2010 (14.90 percent). Consequently, as reported in the advance release, the cumulative trade drag on the current weak U.S. economic recovery shot up from 6.57 percent to 10.13 percent.

Trade’s absolute bite from annualized quarterly real growth remained the biggest (1.70 percentage points from 1.84 percent annualized growth) since the second quarter of 2010 (1.77 percentage points from 3.86 percent annualized growth) – though it dipped in absolute terms. On an annual basis, though, the trade drag on constant-dollar American growth still came in much lower than in 2015 – falling from 0.71 percentage points out of a 2.60 percent improvement o 0.12 percentage points out of a 1.60 percent uptick.

The fourth quarter price-adjusted annualized trade deficit stayed at $599.6 billion – still the biggest since the $623.7 billion mark of the first quarter of 2008. The annual real trade shortfall of $561.6 billion was unrevised, too, and remained the greatest since 2007’s $712.6 billion. Both previous peaks were reached as the Great Recession was breaking out.

The new GDP figures revealed new real export records for services ($685.5 billion annualized) on a quarterly basis and for combined goods and services exports ($2.1288 trillion) on an annual basis. Both results were upgraded fractionally. New records also remained in place for quarterly overall imports ($2.7395 trillion annualized – a slight upward revision), and quarterly goods imports ($2.2533 trillion annualized – a small downgrade). The same was true for annual overall imports (revised up slightly to $2.6904 trillion), goods imports (downgraded fractionally to $2.2097 trillion), and services imports (upgraded to $478.3 billion).

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

>On the trade front, no news was anything but good news in the U.S. government’s second reading for fourth quarter and full-year 2016 inflation-adjusted gross domestic product (GDP) growth. The new release confirmed last month’s advance report showing that a major jump in the quarterly real trade deficit greatly boosted trade’s drag on the nation’s already feeble economic recovery.

>The revised GDP numbers revealed that the inflation-adjusted trade deficit for goods and services for the fourth quarter stayed at $599.6 billion at an annual rate, which still represented a 14.82 percent on quarter surge, from $522.2 billion. Moreover, this largest sequential percentage increase since the second quarter of 2010 (14.90 percent) kept the trade bite from quarterly growth (1.70 percentage points out of a 1.84 percent annualized real GDP increase) as the deepest since that second quarter of 2010 (1.77 percentage points out of 3.86 percent annualized growth). And since the overall after-inflation sequential GDP improvement was revised down slightly from 1.86 percent, the trade drag worsened slightly.

>In consequence, the new figures showed that the trade subtraction from cumulative real GDP growth during this historically feeble American economic recovery still rose from 6.57 percent to 10.13 percent sequentially.

>The rise in the Made in Washington U.S. trade deficit has slashed recovery-era growth to a much greater extent. This gauge measures trade flows heavily influenced by U.S. trade policies – of goods excluding oil (which doesn’t tend to come up in trade negotiations and where American net imports have dropped dramatically) and services (where trade liberalization remains limited).

>The latest full-year 2016 figures show that this Made in Washington shortfall has cut cumulative inflation-adjusted growth during the recovery by 18.86 percent, or $461.78 billion.

>On an annual basis, however, the GDP report left unrevised a drop in the trade drag on growth – from 0.71 percentage points from 2.60 percent inflation-adjusted growth in 2015 to 0.12 points out of a 1.60 percent real GDP increase last year.

>The real trade deficit also grew in 2016 at a much slower pace (four percent) than in the fourth quarter. Nonetheless, at the same $561.6 billion level, it remained the greatest annual price-adjusted trade gap since 2007 ($712.6 billion).

>The new GDP report confirmed its predecessor’s finding that the real trade deficit also rose proportionately in the fourth quarter of 2016 – to its highest share of after-inflation GDP (3.57 percent) since the fourth quarter of 2008 (3.64 percent).

>Similarly, today’s GDP numbers reiterated the rise in the full-year 2016 constant-dollar trade gap as a share of real GDP to its highest level (3.37 percent) since 2008 (3.76 percent).

>As a result, the real trade deficit’s absolute sequential increase in the fourth quarter of 2016 ($77.4 billion) stayed the strongest such rise since these figures began being tabulated by the Commerce Department in 1999.

>The new GDP figures slightly upgraded fourth quarter services exports – from a record $685.4 billion to $685.5 billion. The sequential rate of increase inched up from 0.22 percent to 0.23 percent.

>The annual combined goods and services exports figure was upgraded a bit, too – from $2.1284 trillion (another all-time high) to $2.1288 trillion. And the 2016 rate of increase came in at 0.39 percent, rather than 0.37 percent.

>Yet the slew of import records reported in the advance GDP estimate rose fractionally as well.

>In the fourth quarter, overall imports are now estimated to have hit $2.7395 trillion annualized, as opposed to $2.7380 trillion. That 2.06 percent increase slightly exceeds the two percent figure reported previously.

>As for fourth quarter price-adjusted goods imports, where the advance report pegged them at a record $2.2548 trillion annualized (up 2.62 percent), the revised figures are $2.2533 trillion (still an all-time high) and 2.55 percent, respectively. 

>During full-year 2016, overall real imports were initially reported at $2.6901 trillion – up 1.11 percent on year. Both numbers were revised slightly higher – to $2.6904 trillion and 1.12 percent, respectively.

>Real goods imports numbers for full-year 2016, however, were downgraded a bit. Originally reported at $2.2101 trillion, or up 0.73 percent over 2015 levels, they are now judged to have been $2.2097 trillion – reflecting a 0.71 percent rise.

>Upward revisions were more substantial for inflation-adjusted services imports in 2016. Rather than rising 2.84 percent on year, to $477.6 billion, they are now estimated to have grown by 2.99 percent, to a new record $478.3 billion.

(What’s Left of) Our Economy: U.S. Trade Deficit Soars in Fourth Quarter and Slows Recovery Growth Dramatically

Tags

exports, GDP, goods, gross domestic product, imports, Made in Washington trade deficit, oil, real GDP, real trade deficit, recovery, services, Trade, trade deficit, {What's Left of) Our Economy

The government’s first figures for fourth quarter and full-year 2016 gross domestic product (GDP) showed the biggest relative quarterly jump in the real annualized U.S. trade deficit (14.82 percent) since the second quarter of 2010 (14.90 percent). As a result, the cumulative trade drag on the current weak U.S. economic recovery shot up from 6.57 percent to 10.13 percent. Trade also took its biggest absolute bite from annualized quarterly real growth (1.70 percentage points from 1.86 percent annualized growth) since the second quarter of 2010 (1.77 percentage points from 3.86 percent annualized growth).

On an annual basis, though, trade drag’s on constant-dollar American growth fell from 0.71 percentage points out of a 2.60 percent improvement to 0.12 percent out of a 1.60 percent uptick. The fourth quarter price-adjusted annualized trade deficit of $599.9 billion was the biggest since the $623.7 billion mark of the first quarter of 2008, and the annual real trade shortfall of $561.6 billion was the biggest since 2007’s $712.6 billion. Both previous peaks were reached as the Great Recession was breaking out.

The new GDP figures revealed new real export records for services ($685.4 billion annualized) on a quarterly basis and for combined goods and services exports ($2.1284 trillion) on an annual basis. New records were also set for quarterly overall imports ($2.7380 trillion annualized), and quarterly goods imports ($2.2548 trillion annualized), and for annual overall imports ($2.6901 trillion), goods imports ($2.2101 trillion), and services imports ($477.6 billion).

Here are the trade highlights from Friday morning’s GDP report from the Department of Commerce:

>The U.S. government’s advance reading of fourth quarter and full-year 2016 inflation-adjusted gross domestic product (GDP) growth shows that a major jump in the quarterly real trade deficit greatly boosted trade’s drag on the nation’s already feeble economic recovery.

>The inflation-adjusted trade deficit for goods and services surge by 14.82 percent on quarter, from $522.2 billion at an annual rate to $599.6 billion. This largest sequential percentage increase since the second quarter of 2010 (14.90 percent) resulted in the greatest trade bite from quarterly growth (1.70 percentage points out of a 1.86 percent annualized real GDP increase) since that second quarter of 2010 (1.77 percentage points out of 3.86 percent annualized growth).

>In consequence, the trade subtraction from cumulative real GDP growth during this historically feeble American economic recovery increased from 6.57 percent to 10.13 percent.

>The rise in the Made in Washington U.S. trade deficit has slashed recovery-era growth to a much greater extent. This gauge measures trade flows heavily influenced by U.S. trade policies – of goods excluding oil (which doesn’t tend to come up in trade negotiations and where American net imports have dropped dramatically) and services (where trade liberalization remains limited).

>Although the first full-year 2016 figures won’t be released until next week, as of the third quarter, the increase in this Made in Washington shortfall cut cumulative inflation-adjusted growth during the recovery by 16.05 percent.

>On an annual basis, trade reduced growth by less in 2016 (0.12 points out of a 1.60 percent real GDP increase) than in 2015 (when it cut 0.71 percentage points from 2.60 percent growth).

>The real trade deficit also grew in 2016 at a much slower pace (four percent) than in the fourth quarter. Nonetheless, at $561.6 billion, it was the greatest annual price-adjusted trade gap since 2007 ($712.6 billion).

>The real trade deficit is also up proportionately as of the end of 2016. In the fourth quarter, it reached its highest share of after-inflation GDP (3.57 percent) since the fourth quarter of 2008 (3.64 percent).

>The full-year 2016 constant-dollar trade gap as a share of real GDP reached its highest level (3.37 percent) since 2008 (3.76 percent).

>In addition, the real trade deficit’s absolute sequential increase in the fourth quarter of 2016 ($77.4 billion) was the strongest such rise since these figures began being tabulated by the Commerce Department in 1999.

>The new GDP figures showed that on a sequential basis, services exports rose by 0.22 percent in the fourth quarter – to a new record of $685.4 billion on an annualized basis.

>Moreover, on an annual basis, combined goods and services exports hit an all-time high, too – rising 0.37 percent in 2016, to $2.1284 trillion.

>Yet import records were hit in the combined real goods and services, and real goods categories on a quarterly basis, and in all major inflation-adjusted categories on an annual basis.

>In the fourth quarter, overall imports rose by two percent after inflation, to $2.7380 trillion annualized.

>Price-adjusted goods imports were up 2.62 percent, to $2.2548 trillion annualized, during the quarter.

>During full-year 2016, overall real imports increased by 1.11 percent, to $2.6901 trillion.

>Real goods imports during the year were 0.73 percent higher than in 2015, reaching $2.2101 trillion.

>Real services imports in 2016 rose by 2.84 percent, to $477.6 billion.