(What’s Left of) Our Economy: So the Economy Can’t Grow When the Trade Balance Improves?

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Associated Press, growth, inflation-adjusted growth, Paul Wiseman, real trade deficit, Trade, Trade Deficits, {What's Left of) Our Economy

Yesterday’s release of the December and full-year 2017 U.S. trade figures means that there will be lots of detailed data to mine for the next week or two. But the new numbers, and the press coverage, also create a great opportunity to dispel one of the leading myths surrounding the impact of trade – and especially trade deficits – on the U.S. economy.

The myth was nicely stated in the Associated Press coverage of the new trade report – which matters a lot because the AP is one of the leading sources of news for both the nation and the world. According to reporter Paul Wiseman,

“[W]hen it comes to trade, there’s a flip-side to good times [touted by President Trump and others]: ‘A stronger economy will draw in more imports’ as confident consumers seek out foreign products, says Bernard Baumohl, chief economist at the Economic Outlook Group.

“Recent history shows that the trade deficit tends to grow when times are good and shrink when they turn bad. The trade gap hit a record $762 billion in 2006 toward the end of a six-year economic expansion. It dropped to $384 billion in 2009, in the depths of the Great Recession as American consumers hunkered down and bought fewer imports.

“‘If the goal is to reduce the trade deficit, we know how to do that — just send our economy crashing and we won’t be able to afford to import as much’ says Bryan Riley, director of the conservative National Taxpayers Union’s Free Trade Initiative.”

This relationship holds more often than not. But the notion unmistakably conveyed by Wiseman and especially by the supposed authorities he cites – that it always holds – just doesn’t bear scrutiny.

The U.S. Census Bureau, which tracks the trade deficit, and the Bureau of Economic Analysis (like Census, another division of the Commerce Department), which tracks economic growth, both conveniently provide the historical statistics anyone needs should he or she show some actual curiosity about such claims. And what these figures show is that, for two and half decades – from 1961 till the early 1990s – the U.S. economy regularly managed to grow (and often quite nicely) in years when the trade balance improved. This includes years when a surplus increased, a deficit shrunk, or when a deficit turned into a surplus.

All told, such trade balance improvement took place thirteen times during this period: 1961, 1963, 1964, 1970, 1973, 1975, 1979, 1980, 1981, 1988, 1989, 1990, and 1991

And of these 13 years, the economy grew in nine on an inflation-adjusted basis (the most widely looked at measure): 1961, 1963, 1964, 1970, 1973, 1979, 1981, 1988, and 1990.

Moreover, even though improving trade balances (specifically, falling deficits) have been rarer since, they haven’t been unknown. This development took place in 1995, 2007, 2009, and 2012. And of these years, the economy grew in real terms in all except 2009.

What’s been seen more seldom – though not “never” – is a year-to-year speed-up in growth while the trade balance improves. But this combination has been seen five times since 1960: in 1964, 1973, 1981, 1988, and 2012. For good measure, the trade surplus expanded in 1961, and after-inflation growth remained at its previous-year level of 2.6 percent.

Nor does the picture change much when you look at the annual changes in the inflation-adjusted trade balance. From 1961 through the early 1990s, this trade balance improved in 13 years – the same number as that for the current-dollar trade balances, though the specific list is slightly different. These years were: 1963, 1964, 1970, 1973, 1974, 1975, 1979, 1980, 1987, 1988, 1989, 1990, and 1991

In ten of those years, the economy grew: 1961, 1963, 1964, 1970, 1973, 1979, 1987, 1988, 1989, and 1990

Since the early 1990s, the real trade balance has improved six times: 1995, 2007, 2008, 2009, 2012, 2013. And it remained roughly the same in 2011. In all of those years – except for 2008 and 2009 – the real economy expanded.

Re the accelerating growth criterion, through the early 1990s, it was met in three of the ten years during which the economy expanded and the trade balance improved. In two other years, the trade balance improved and economic growth held steady (1962 and 1987).

More recently, since the early 1990s, the economic grew in price-adjusted terms in four years when the trade balance improved. In addition, the trade balance barely budged (for the worse) in another growth year: 2011.

A bigger difference comes in terms of accelerating growth – an improving real trade balance has coincided with a growth speed-up only once during this period: 2012.

Now a skeptic could (correctly) observe that during the 1960s and 1970s, trade was considerably less important to the economy. At the same time, this observation also means that American economic policymakers have failed to meet the crucial challenge of helping the economy sustain healthy growth as it’s steadily – and sometimes rapidly – internationalized.

But the paramount point is that, contrary to the conventional wisdom, there’s no inherent reason why the economy’s trade position should worsen when it grows. And you can indeed look it up.

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(What’s Left of) Our Economy: Trade Returns as a (Big) Drag on U.S. Growth

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

The first estimate of fourth quarter and full-year 2017 U.S. real growth came out Friday, and it completely overwhelmed me for two reasons. The first, and least important, was that I was traveling, so completing my analysis the same day wasn’t possible. The second, and most important, was that it was shot through with trade-related records and multi-year highs – mostly of the kind that hold back the American economy. So today I’ll be presenting an abbreviated version of my usual report, focusing almost entirely on those milestones.

>The new gross domestic product (GDP) figures showed that a sequential surge in the inflation-adjusted annualized trade deficit during the year’s last three months prevented the U.S. economy from achieving a current recovery first: three straight quarters or more of three percent or more annualized growth. In fact, the economy hasn’t seen such a period since late 2004-early 2005.

> That jump in the trade deficit jump cut 1.13 percentage points from the fourth quarter’s disappointing 2.53 percent annualized growth – the biggest such absolute and relative subtraction since the fourth quarter of 2016 (1.61 percentage points from 1.75 percent annualized growth). In fact, trade undermined after-inflation growth in the fourth quarter of 2017 for the first time since that end-of-2016 quarter.

>At the same time, on an annual basis, the trade drag on real GDP fell in 2017 to 0.18 percentage points of 2.25 percent inflation-adjusted growth from 2016’s 0.23 percentage points of 1.49 percent growth. In addition, the 2017 figure was the smallest annual growth drag since the 0.16 percentage point and 2.57 percent numbers of 2014.

>The fourth quarter real annualized trade deficit of $652.5 billion was the highest since the $703.2 billion reached during the third quarter of 2007 – just before the Great Recession’s onset. As a share of real GDP, it hit is highest level (3.78 percent) since the first quarter of 2008 (4.19 percent) – in the recession’s first months.

>For the full year, the trade shortfall’s share of real GDP reached its highest level in 2017 (3.64 percent) since 2008 (3.76 percent).

>New records were set for real total exports and goods exports on a quarterly basis ($2.2295 trillion and $1.5527 trillion on an annual basis, respectively) and for all major import categories ($2.8128 trillion for total imports, $2.3144 trillion for goods imports, and $496.3 billion for services imports – all at annual rates).

>Some rates of change for exports and imports were noteworthy as well. On a quarterly basis, the total imports increase of 13.2 percent annualized was the biggest since the 14.10 percent in the third quarter of 2010. The goods import rise of 15.84 percent annualized was the biggest since the 22.05 percent of the second quarter of 2010.

>For the full year, 2017’s real total exports improvement of 3.36 percent was the best such performance since 2014’s 4.28 percent rise, while the after-inflation goods export increase of 4.54 percent was the biggest advance since 2011’s 6.85 percent.

>On the import side, the 3.94 percent annual constant dollar rise in 2017 was the biggest for goods and services combined since 2014’s 4.96 percent. For goods, 2017’s 4.25 percent import increase in price-adjusted terms was the biggest since 2015’s 5.16 percent.

>The real trade deficit’s sequential fourth quarter jump boosted the trade drag on the current economic recovery from 8.23 percent to 9.82 percent – translating into $286.3 billion in lost constant dollar growth since the expansion began in the middle of 2009.

>The far greater growth drag of the increase in the Made in Washington trade deficit – which focuses on the non-oil goods trade flows most heavily influenced by trade agreements and other trade policies – won’t be known until the December monthly trade data come out early next month. But as of the third quarter, it had reduced cumulative recovery growth by 16.36 percent, or just under $460 billion in price-adjusted terms.

 

(What’s Left of) Our Economy: New Data Show Trade’s Still Fueling U.S. Growth – But a Little Less So

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

The final (for now) estimate of third quarter real growth, showed that the slight downward revision in the previously reported rate of expansion stemmed partly from a marginally worse trade performance. The combined goods and services shortfall was upgraded from $594.4 billion at an annual rate to $597.5 billion. As a result, trade’s contribution to third quarter expansion was downgraded from a 0.43 percentage point addition to 3.26 percent annualized after inflation growth to a 0.36 percentage point contribution to a 3.12 percent annualized real GDP advance.

Even so, the result remained three straight quarters of constant dollar trade deficit shrinkage for the first time since a 2012-2013 stretch. The combined deficit still shrank on a quarterly basis by the greatest annualized amount (10.50 percent) since the 46.14 percent annualized plummet in the fourth quarter of 2013. And trade’s growth-fueling effects still continued into their third straight quarter – also for the first time since 2012-2013. The composition of quarterly inflation-adjusted trade deficit reduction remained encouraging as well, with the combination of exports improvement and import fall-offs showing that domestic producers were supplying more demand both at home and abroad simultaneously for the first time since the third quarter of 2014.

The biggest downgrades in the trade figures came in services trade – especially a sequential real export increase now judged to have been 2.52 percent at annual rates, not 3.17 percent. The new GDP figures showed constant dollar exports in all major categories remained at record levels, but overall quarterly export growth was revised down from 2.16 percent annualized to 2.07 percent annualized. The price-adjusted quarterly total import decrease was revised down from 1.07 percent at an annual rate to 0.69 percent, but still remained the biggest drop since the fourth quarter of 2012 (3.82 percent annualized).

Because quarterly after-inflation trade shortfall was revised up, the trade drag on the current economic recovery inched up, too – from 8.11 percent to 8.23 percent ($231.2 billion in lost real growth). It’s still down considerably from the second quarter’s 9.24 percent. Similarly, the trade drag of the Made in Washington deficit – which tracks flows heavily influenced by U.S. trade policy – grew from the previously reported 16.32 percent to 16.36 percent ($459.5 billion in lost real growth). That’s still down significantly from the 17.30 percent second quarter drag.

Here are the trade highlights from this morning’s report on the gross domestic product (GDP):

>The Commerce Department’s final (for now) read on third quarter inflation-adjusted economic growth showed that a slightly worse trade performance than previously reported helped slow the economy’s expansion marginally.

>The annualized growth rate fell from 3.26 percent to 3.12 percent in part because the quarter’s real annualized trade deficit was upgraded from a downwardly revised $594.4 billion to $597.5 billion.

>As a result, trade’s contribution to real growth was downgraded from 0.46 percentage points of that 3.26 percent annualized growth to 0.36 percentage points out of 3.12 percent annualized growth.

>All the same, the new results still showed that the after-inflation trade deficit has fallen sequentially for three straight quarters – for the first time since a period in 2012-13.

>They also still showed, therefore, that trade fueled growth on net for three straight quarters for the first time since that 2012-13 period.

>And this morning’s results also still showed that the constant dollar deficit fell sequentially in the third quarter by its fastest rate (10.50 percent) since the 46.14 percent plunge in the fourth quarter of 2014.

>The pattern of real trade deficit shrinkage also remained encouraging. As with the first and second reads for the third quarter, this third report showed that the gap narrowed both because exports grew and imports shrank. In other words, the United States was supplying increased demand both at home and abroad simultaneously – the first time it has achieved that objective since the third quarter of 2014. That’s a much better reason for trade deficit shrinkage than, say, weak growth or contraction that depresses imports.

>The weak spot in these final third quarter GDP and trade figures seems to be services. Originally judged to be growing at an annualized sequential rate of 4.04 percent, this figure has now been downgraded to 3.17 percent and now 2.52 percent.

>Yet the new annualized total of $686.6 billion after inflation remained a quarterly record.

>Real services imports performed somewhat better. But their annualized quarterly decrease was still judged to be smaller than reported last month – 2.73 percent instead of 2.97 percent (for a quarterly annualized total of $494.8 billion).

>Nonetheless, services imports still fell at the fastest quarterly annualized rate since their 7.59 percent annualized swoon in the first quarter of 2011.

>Although the third quarter’s annualized real growth rate for inflation-adjusted total exports was further downgraded from 2.16 percent to 2.07 percent (resulting in a $2.1924 trillion annualized figure) this figure stayed in quarterly record territory.

>Goods exports, however, performed somewhat better on a price-adjusted basis. Their real annualized sequential growth rate was upgraded again – from 1.63 percent to 1.84 percent. And the $1.5073 trillion figure was a new inflation-adjusted quarterly record.

>As with services imports, total and goods imports declined less on a quarterly basis.

>Total inflation-adjusted imports sank by 0.69 percent sequentially at an annual rate in the third quarter, according to the new figures, not the 1.07 percent previously reported. But this decrease was still the biggest since the 3.82 percent quarterly drop in the fourth quarter of 2012 – when real growth was a paltry 0.09 percent annualized.

>The new total real imports figure for the third quarter was $2.7900 trillion.

>The previous GDP report showed inflation-adjusted goods imports falling in the third quarter at a 0.65 percent sequential rate – the fastest since the 4.40 percent pace during that dreary fourth quarter of 2012.

>This morning, this decline was judged to be only 0.24 percent – only the fastest rate since the first quarter of 2016’s 0.47 percent.

>The new third quarter real goods import figure is $2.2929 trillion.

>Since the real trade deficit is now judged to be slightly higher than in the previous third quarter GDP reports, the new numbers also revealed that trade’s drag on the current economic recovery increased a bit.

>As of the second quarter, the inflation-adjusted trade deficit’s increase since the recovery began – in the middle of 2009 – had reduced cumulative growth by 9.24 percent.

>The initial third quarter read lowered this number to 8.18 percent, and the second to 8.11 percent. But today’s figures produce a greater 8.23 percent drag, representing $231.2 billion worth of lost growth.

>The growth-killing effects of the Made in Washington trade deficit have been considerably greater – and inched back up as well per the new third quarter data.

>This trade deficit and its growth drag can be calculated by removing constant dollar oil trade and services trade from trade figures – two areas where trade liberalization’s impact so far has been modest at best. What’s left are the U.S. trade flows most heavily affected by trade agreements and other Washington policy decisions.

>When the first read on third quarter GDP came out, third quarter figures for the Made in Washington deficit were not available, but the second quarter GDP report revealed a drag of 17.30 percent. As of the second read, it had fallen to 16.32 percent.

>Today’s report, however, pushed the drag back up to 16.36 percent, or $459.5 billion in real growth lost since the recovery began.

(What’s Left of) Our Economy: Latest GDP Figures Confirm Trade’s Boosting U.S. Growth Once More

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

Due to extenuating circumstances, my usual same-day report on Friday’s gross domestic product (GDP) figures couldn’t come out on the same day. Still, its trade-related aspects are important enough to warrant attention.

Specifically, the government’s first read on inflation-adjusted growth in the third quarter (which will be revised twice more in the next two months) shows that America’s trade performance made its biggest relative contribution to the current expansion in nearly four years. Between July and September, the narrowing of America’s trade deficit accounted for 0.41 percentage points of that quarter’s 2.95 percent real growth at an annual rate. Not since the fourth quarter of 2013, (when it generated 1.29 percentage points out of 3.90 percent annualized after-inflation growth) had trade played such a prominent positive role.

Trade’s real growth contribution also took a distinctive form in the third quarter: For the first time since the third quarter of 2014, the trade addition to inflation-adjusted growth came both through exports rising and imports falling. In other words, the nation was able to supply more demand abroad and at home simultaneously.

Moreover, for the first time since a stretch in 2012 and 2013, trade on net fueled constant-dollar growth for three consecutive quarters. In fact, trade’s growth role has now been positive for five of the last six quarters.

These developments stemmed in part from the real trade deficit’s fall in the third quarter from $613.6 billion annualized to $595.5 billion – its lowest level since the third quarter of 2016 ($557.3 billion).

Further, in percentage terms, this quarter-to-quarter decline in the real trade deficit was the greatest (11.80 percent at an annual rate) since the fourth quarter of 2013 (46.14 percent at an annual rate) – when annualized growth, again, neared four percent.

All three categories of inflation-adjusted U.S. exports tracked in the GDP report hit new quarterly records in the third quarter.

Total after-inflation exports increased 2.31 percent sequentially at an annual rate, to $2.1937 trillion annualized.

Price-adjusted goods exports improved by 1.40 percent sequentially at an annual rate, to $1.5056 trillion annualized.

And constant-dollar services exports were 4.04 percent higher at an annual rate than in the second quarter, to reach $689.2 billion annualized.

All import categories, however, retreated in the third quarter to their second-highest all-time levels after inflation.

Total imports dropped for the first time since the first quarter of 2016 (when annualized growth of 0.58 percent was much lower). Further, the decrease (to $2.7892 trillion annualized) was the fastest (3.20 percent at an annual rate) since the third quarter of 2014 (3.88 percent) – when real growth was considerably faster (5.11 percent annualized).

Inflation-adjusted goods imports also fell quarter-to-quarter (to $2.2914 trillion annualized) for the first time since the first quarter of 2016. Moreover, the decrease (2.04 percent at an annual rate) was the biggest since the third quarter of 2014 (4.28 percent) – when annualized real growth topped five percent.

Constant-dollar services imports fell sequentially for the first time since the third quarter of 2014 as well. In addition, the decrease – 2.17 percent at an annual rate, from $498.2 billion annualized to $495.5 billion annualized – was the biggest since the 7.59 percent annualized nosedive in the first quarter of 2011.

Because of the real trade deficit’s shrinkage, trade’s drag on the recovery shrank as well in the third quarter.

This initial estimate of third quarter real GDP reveals that, since the second quarter of 2009 (when the current economic recovery officially began), the increase in the inflation-adjusted trade deficit has cut the expansion’s cumulative growth by 8.18 percent, or $229.2 billion.

The comparable figures for the first and second quarters were 10.04 percent and 9.24 percent, respectively.

Yet the growth-killing effects of the Made in Washington trade deficit – those U.S. trade flows most heavily affected by trade policy and related decisions – is still much greater. This trade deficit and its growth drag can be calculated by removing oil trade and services trade from trade figures – two areas where trade liberalization’s impact so far has been modest at best.

Third quarter data is not yet available, but as of the second quarter, the post-2009 increase in this trade deficit had cut constant-dollar growth during the current recovery by $462.8 billion, or 17.30 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

Tags

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: Modest Trade Improvement Helps Lift U.S. Growth a Bit

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

The government’s first revision of first quarter gross domestic product (GDP) figures showed that the inflation-adjusted trade deficit shrank slightly more than originally reported on a sequential basis, and therefore boosted growth by fractionally more (0.13 percentage points rather than 0.07 percentage points). Nonetheless, the quarter-to-quarter positive swing in trade’s growth role (1.95 percentage points) now matches the biggest such change since the fourth quarter of 2010. The $599.9 billion quarterly real trade still represented 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.

The new GDP figures show all of the major categories of after-inflation exports and imports still at new quarterly records, with the former generally fractionally higher and the latter generally fractionally lower. (Services exports were the exception.) The cumulative growth drag created by the real trade deficit’s increase during the current, historically feeble economic recovery shrank from 9.70 percent in the advance first quarter GDP read to 9.32 percent. Separate Census data show that the Made in Washington trade drag declined in the first quarter as well, but at 21.26 percent still represented nearly $533 billion in foregone real output.

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

>The government’s second look at first quarter U.S. gross domestic product (GDP) showed that a slightly smaller real trade deficit than previously reported made a slightly larger contribution to inflation-adjusted growth.

>The new $599.99 billion annualized trade deficit number (down from the previously reported $605 billion) means that the shortfall shrank sequentially by 0.84 percent. As a result, trade’s absolute boost to growth (0.13 percentage points) was larger than the 0.07 percentage point figure reported last month.

>Moreover, the quarterly positive swing in the trade’s growth role from the fourth quarter of last year (when it subtracted 1.82 percentage points) grew to 1.95 percentage points – matching the biggest such total since the fourth quarter of 2010.

>At the same time, this 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 succumb to the Great Recession.

>All categories of exports and imports tracked in the real GDP figures remained at new quarterly records in the first quarter, with all export totals except for services exports rising modestly, and all import totals falling modestly.

>Combined annualized goods and services exports in the first quarter were upgraded from $2.1675 trillion to $2.168 trillion – 1.43 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 goods export total was revised up from $1.4828 trillion to 1.4832 trillion – an increase of 2.04 percent over the fourth quarter. The previous record of $1.4792 trillion was also set in third quarter, 2016.

>Services exports remained unchanged at $685.8 billion annualized – and still topped the previous record of $684 billion record set in the first quarter of 2015.

>Total annualized first quarter imports were pegged at $2.7679 trillion – a bit lower than the previously reported $2.7703 trillion level, and 0.93 percent higher than the fourth quarter total. The new first quarter level still bested the previous $2.7424 billion record of that fourth quarter.

>Goods imports also were revised down fractionally, from $2.2797 trillion to $2.2782 trillion. That still represented a 1.03 percent increase over the fourth quarter level of $2.2549 trillion – the previous record.

>Services imports were reported last month at their eighth straight quarterly record., and they remained so in today’ report. But the previous $488.3 billion figure was revised down to $487.4 billion – a 0.47 percent sequential increase.

>According to these new GDP figures, the trade drag on the current, historically weak, economic recovery was smaller in the first quarter than previously estimated. The 9.70 percent figure was revised down to 9.32 percent – somewhat lower than the fourth quarter’s 9.71 percent. The new data mean that the economy has grown by $233.6 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 and separate figures compiled by the Census Bureau. But it, too, has been slightly downgraded.

>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 21.26 percent.

>That’s down from the 21.67 percent growth loss that could be calculated from the previous GDP report, but it will means that the growth of this policy-influenced trade deficit has cost the U.S. economy $532.9 billion in cumulative inflation-adjusted production during this recovery.

(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.