(What’s Left of) Our Economy: Records and More Puzzles in the GDP Report’s Trade Numbers

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(What's Left of) Our Economy, CCP Virus, Commerce Department, coronavirus, COVID 19, exports, GDP, global financial crisis, goods, Great Recession, imports, inflation-adjusted growth, real GDP, real trade deficit, recession, services, Trade, trade deficit, Wuhan virus

So many all-time and multi-year and even decade worsts revealed by the trade data revealed in the official U.S. economic growth figures released this morning! And even though these data on changes in the gross domestic product (GDP) for the third quarter of this year are pretty meaningless from an economic standpoint – because they’re so thoroughly distorted by the government-ordered shutdowns and reopenings due to the CCP Virus – they’re worth noting for the record, anyway.

But here’s something else worth noting – as with the last batch of GDP figures (the final-for-now results for the second quarter), the trade figures don’t seem to add up.

Let’s start with the records. Largely due to the strongest sequential U.S. growth on record (33.1 percent after inflation on an annualized basis), fueled by significant reopening plus massive government stimulus or relief funds (choose your own label), the quarterly inflation adjusted trade deficit hit an astounding $1.0108 trillion annualized. (The inflation-adjusted, or “real,” statistics are the ones most closely followed; therefore, unless otherwise specified, they’ll be the ones used from hereon in.)

Not only was that total a record in absolute terms. The 30.41 percent increase from the final second quarter level of $775.1 billion was the biggest since the Commerce Department began presenting trade deficit figures (as opposed to the simple export and import findings) in 2002. For context, the next greatest such jump was only 13.18 percent, between the first and second quarters of 2010.

The economy was recovering then, too – from the Great Recession that followed the global financial crisis – but that quarter’s annualized growth rate was only 3.69 percent.

As known by RealityChek regulars, the GDP reports treat increases in the trade deficit as subtractions from growth, and the third quarter’s was the worst in absolute terms (3.09 percentage points from that 33.1 percent annualized growth total) since the 3.22 percentage points sliced from growth in the third quarter of 1982. (For some reason, these data go back even further than that.)

In relative terms, though, the trade effect in 1982 couldn’t have differed more from the situation this year, as during that third quarter, the economy shrank in price-adjusted terms by 1.5 percent on an annual basis.

But those internal numbers!

According to the Commerce Department, exports in the third quarter added up to $2.1667 trillion annualized. But if you actually add the separate goods and services numbers provided, you get a sum of $2.1921 trillion. On the import side, the separate figures add up to a total of $3.2123 trillion, not the reported $3.1775 trillion. Therefore, the quarterly deficit would seem to be $1.0202 trillion, not the $1.0108 trillion presented.

As with the previous discrepancies, although this batch’s aren’t big enough to change the overall picture, they do raise some questions about the reliability of the rest of the data. So I’ll be hoping that the apparent confusion will be cleared up a month from now, when Commerce releases its second estimate for third quarter GDP – but not holding my breath.

(What’s Left of) Our Economy: U.S. Manufacturing’s Jobs Recovery Continues Strongly

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automotive, CCP Virus, coronavirus, COVID 19, exports, Jobs, manufacturing, NFP, non-farm jobs, non-farm payrolls, private sector, services, Trade, Wuhan virus, {What's Left of) Our Economy

The big question raised by today’s second straight expectations-clobbering official monthly U.S. jobs report (for June) is whether the surge in recovered employment can withstand whatever second CCP Virus wave of infections, or resurgence of the first wave, numerous states have been seeing lately.

I can’t answer that knowledgeably – and I suspect few others can, either. What I can do is note that the June numbers roughly repeat or confirm some of the patterns visible for May. Mainly, manufacturing held up better than the rest of the American jobs market, and within manufacturing, the swings have been dominated by the automotive sector.

Domestic industry added a net 356,000 workers to its payrolls in June, and revisions for the last two months – as with non-farm jobs as a whole (the U.S. government’s jobs universe) – were slightly positive (virtually unchanged at a 1.32 million net loss for April, upgraded from a 225,000 to a 250,000 net gain in May).

Fully 55 percent (195,800) of those 356,000 new June manufacturing jobs came in the automotive sector – a rubber band-like comeback surely reflecting the outsized hit this industry has taken since the CCP Virus threw the entire economy into a deep downturn. Even with this improvement, since February, combined vehicle and parts employment is down more than twice as much relatively speaking (12.11 percent) as overall manufacturing employment (5.89 percent).

Further, overall manufacturing’s record of pandemic-era resilience continued in June. Its monthly jobs growth was only 3.03 percent – slower than the rate for the total non-farm sector (3.61 percent) and the private sector (4.27 percent).

But a main reason is that manufacturing has taken a much smaller CCP Virus hit than the rest of the economy. That 5.89 percent employment loss since February has been considerably less than that of the non-farm sector (9.62 percent) or the private sector (10.17 percent).

Manufacturing employment could face some intriguing crosswinds in the months ahead. A second virus wave or a re-strengthening first wave may well slow its jobs rebound going forward, since U.S.-based industry sells so much to those domestic service industries that have borne the brunt of the pandemic-created economic damage. At the same time, domestic manufacturers were selling just under 18 percent of their gross output overseas as of the end of last year, so if recoveries quicken overseas, U.S.-based manufacturers and their workers could benefit significantly.

In this vein, one possibly hopeful sign is that as of May, according to this morning’s monthly U.S. trade report from the Census Bureau, manufacturing exports are down a whopping 15.74 percent year-to-date. And they fell 5.28 percent in May alone. Therefore, precisely because the “comps” have been so lousy, domestic manufacturers could experience something of a rubber-band-like bounceback of their own – at least in the near-term future.

(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: China, Manufacturing, the EU, & Canada (sort of) Led the New Trade Deficit Surge

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Canada, China, EU, European Union, exports, imports, Made in Washington trade deficit, manufacturing, Mexico, NAFTA, North American Free Frade Agreement, oil, real trade deficii, recovery, services, tariffs, Trade, trade deficit, Trump, {What's Left of) Our Economy

With President Trump still threatening to slap $200 billion worth of tariffs on Chinese imports this week, this morning’s trade figures from the Census Bureau show that the U.S. goods deficit with China hit a new monthly record of $36.83 billion. The U.S. manufacturing trade shortfall reached an all-time high as well – $92.29 billion. And as talks to revamp NAFTA (the North American Free Trade Agreement) continue, America’s goods gap with Canada jumped by nearly 58 percent on month, but the merchandise shortfall with Mexico sank by more than 25 percent.

The goods gap with the European Union, meanwhile, reached record monthly heights as well ($17.59 billion). The sequential increase of 50.03 percent was the greatest since October, 2013 (58.87 percent) and was driven by the biggest monthly plunge in U.S. merchandise exports (15.72 percent) to the region since July, 2006 (16.62 percent).

America’s combined goods and services trade deficit rose at its fastest pace (9.50 percent) since March, 2015 (35.63 percent), to $50.08 billion from a downwardly revised $45.74 billion. Total monthly imports of $261.16 billion were a new record as well, and total monthly exports fell for the first time since January – to $211.08 billion. Other all-time monthly highs were recorded for services exports ($70.29 billion), services imports ($47.22 billion), goods imports ($213.94 billion), and current dollar oil exports ($15.77 billion). Pre-inflation oil imports of $20.32 billion were the highest since December, 2014 ($23.58 billion). Though not a new monthly record in July, the goods trade deficit did increase that month at its fastest pace (6.11 percent) since November, 2016 (6.76 percent).

Although these July trade figures come too early in the third quarter to calculate trade’s drag on the current economic recovery through that period, if the monthly deficits remain in this neighborhood, trade’s subtraction from cumulative growth since the expansion began would rebound after falling during the second quarter. As of the revised second quarter figures, the increase in the real total trade deficit since mid-2009 had reduced inflation-adjusted growth during this period by 11.79 percent, or $398.50 billion. That was down from the $457.20 billion drag (14.33 percent) as of the final first quarter results.

The trade drag numbers are much greater for the Made in Washington trade deficit – that portion of U.S. trade flows most heavily influenced by trade agreements and similar trade policy decisions. As a result, it omits trade in services (where liberalization efforts remain at an early stage) and in energy (which is rarely discussed in trade diplomacy as such). The final first quarter figures pegged this growth drag at 17.37 percent, or $523.88 billion worth of lost constant dollar growth. As of the revised second quarter numbers, this growth bite had shrunk to 14.88 percent, or $502.90 billion worth of lost real growth.

(What’s Left of) Our Economy: February’s Big New U.S. Trade Deficit Driven by Lots of Volatile Internals

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Canada, China, exports, Financial Crisis, Great Recession, high tech goods, imports, manufacturing, Mexico, NAFTA, North American Free Trade Agreement, services, South Korea, Trade, Trade Deficits, Trump administration, {What's Left of) Our Economy

The U.S. monthly trade deficit rose for the sixth straight month in February, to its highest level ($57.79 billion) since some of the darkest days of the last financial crisis (October, 2008’s $60.19 billion). Combined U.S. goods and services exports set their third monthly record ($204.45 billion) in the last four months, but total imports (at $262.04 billion) hit their fifth straight monthly all-time high. New monthly records were also set for goods imports ($214.49 billion), services exports (for the tenth straight month, with a total of $67.27 billion) and services imports ($47.85 billion).

With U.S.-China trade tensions rising, the huge and chronic American trade shortfall with the PRC sank by 18.61 percent on month in February, but the drop was from an unusually high January figure ,and the new total ranked as the biggest February number ever ($29.26 billion). Similar volatility was on display with the U.S. deficits with other trade partners in the Trump administration’s crosshairs, including South Korea, Canada, and Mexico, as well as in manufacturing and high tech goods.

Here are selected highlights of the latest monthly (February) trade balance figures released Thursday morning by the Census Bureau:

>In the process of revealing several new all-time records and multi-year highs and lows, this morning’s U.S. trade balance report also made clear how volatile the nation’s monthly trade figures can be – including those describing the nation’s commerce with major foreign economies whose trade policies have evoked first criticism and now tariffs and threatened levees from the Trump administration.

>The combined U.S. goods and services trade deficit rose in February sequentially for the sixth straight month. The $57.59 billion total, a 1.63 percent increase from January’s upwardly adjusted $56.67 billion figure, was the biggest monthly trade shortfall since October, 2008’s $60.19 billion – when the Lehman Brothers bankruptcy pushed the global financial crisis into a dangerous new phase and ultimately helped usher in America’s worst downturn since the Great Depression of the 1930s.

> U.S. total exports in February set their third new record in the last four months. At $204.45 billion, they were 1.74 percent greater than January’s upwardly adjusted $200.95 billion and 0.41 percent higher than the previous best of $203.61 billion, set last December.

>But U.S. total imports in February set their fifth straight monthly record. The $262.04 billion total was 1.72 percent higher than the upwardly adjusted January level of $257.61 billion – the previous record.

>The $77.01 billion February U.S. trade deficit in goods was also the biggest such total since the last recession – specifically, the $77.63 billion figure for July, 2008. Sequentially, it grew 0.39 percent from January’s upwardly adjusted $76.71 billion.

>America’s services trade remained healthily in surplus in February. But the $19.42 billion excess of exports over imports was the smallest such total since December, 2012’s $18.63 billion. Month-on-month, the services surplus sank by 3.12 percent in February from January’s upwardly adjusted $20.04 billion – the biggest such drop since last April’s 4.88 percent plunge.

>U.S. goods imports set their third record in the last four months in February. At $214.19 billion, they exceeded the January total (the previous record, which has been upwardly adjusted) of $210.86 billion by 1.58 percent.

>Services exports in February set their tenth straight monthly record, rising sequentially by 0.70 percent from an upwardly adjusted $66.80 billion to $67.27 billion.

>Services imports in February set their fourth straight monthly record, rising sequentially by 2.34 percent from a downwardly adjusted $46.76 billion to $47.85 billion. The monthly increase, moreover, was the biggest since August 2016’s 3.67 percent.

>At the same time, reportedly, the February services imports total was fueled in part by payments made by American broadcasters for the rights to televise the Seoul Winter Olympics.

>With U.S.-China trade tensions escalating, the February figures showed that the massive, chronic goods trade surplus run by China with the United States plunged by 18.61 percent sequentially, from $35.95 billion (the second highest monthly total ever) to $29.26 billion.

>The February figure was the lowest since April, 2017’s $27.63 billion, and the monthly decrease was the biggest since last February’s 26.64 percent. Yet the February figure was an all-time February high.

>U.S. goods exports in February declined by 0.30 percent, from $9.84 billion to $9.81 billion – the lowest such total since last April’s $9.84 billion.

>The much larger amount of U.S. goods imports from China sank sequentially by 14.68 percent in February, from $45.79 billion to $39.07 billion.

>The goods import decline was the biggest since last February’s 20.82 percent, and the monthly total was the lowest since April’s $37.47 billion. Yet as with the goods deficit, the new February goods import total was a new monthly record for February.

>A similar story is told by the new statistics for U.S. merchandise trade with South Korea, whose bilateral trade deal with the United States was recently renegotiated.

>America’s goods trade deficit with South Korea also shrank dramatically on month in February – by 65.28 percent, from $1.97 billion to $0.68 billion.

>The February total was the lowest since the 0.56 billion figure recorded for March, 2012 – as the trade agreement went into effect. The month-on-month plummet, moreover, was the biggest since the 70.50 percent drop in February, 2012.

>Yet the January U.S.-South Korea merchandise trade deficit was the biggest since October’s $2.51 billion.

>Still, the composition of the monthly U.S.-South Korea goods trade deficit change differed dramatically from that of the U.S.-China deficit.

>Not only did U.S. merchandise imports from South Korea fall sequentially by 12.05 percent – to $4.97 billion, the lowest such total since last February’s $4.87 billion, and the greatest monthly percentage drop since that month. U.S. merchandise exports to South Korea also jumped on month by 16.36 percent, to $4.92 billion.

>That increase was the biggest percentage-wise since last March’s 22.04 percent.

>The U.S.’ merchandise shortfall with Canada nosedived in February, too – by 89.59 percent on month, from January’s $3.70 billion to $0.38 billion.

>The total was the lowest since last September’s $0.25 billion, and the sequential drop was the steepest since May, 2016’s 95.84 percent.

>But the January deficit was the biggest since December, 2014’s $4.07 billion.

>Most of the U.S.-Canada merchandise deficit’s February monthly decrease came on the American imports side, as these purchases declined by 8.95 percent to $23.92 billion – the largest such decrease since last July’s 11.49 percent, and the lowest such total since that month’s $22.89 billion.

>But U.S. goods exports to Canada also rose on month in February – by 4.28 percent, to $23.53 billion.

>A different kind of volatility was exhibited by U.S. merchandise trade with its other North American Free Trade Agreement (NAFTA) partner, Mexico.

>The American goods trade shortfall with Mexico soared by 46.62 percent sequentially in February, to $6.06 billion. That’s the biggest such increase since the 81.73 percent of March, 2001 – nearly 17 years ago.

>Yet the $4.14 billion January U.S. merchandise deficit with Mexico was the smallest since last January’s $3.95 billion.

>U.S. goods exports to Mexico sank by 7.24 percent on month in February, to a five-month low of $20.22 billion, while goods imports from Mexico climbed by 1.35 percent, to $26.29 billion.

>Volatility in these bilateral deficits was mirrored in February by volatility in the manufacturing trade deficit. This chronic and enormous shortfall plunged sequentially by 15.48 percent, to $73.21 billion. But the January total of $86.62 billion was the second highest of all time.

>Manufacturing exports improved by 2.89 percent sequentially in February, to $88.86 billion, while imports skidded by 6.31 percent, to $162.07 billion.

>High tech goods trade displayed major ups and downs, too. In February, the shortfall cratered 30.96 percent, to $7.93 billion. That was the smallest total since last April’s $6.04 billion.

>But the $11.49 billion January gap was 14.25 percent bigger than the December figure.

(What’s Left of) Our Economy: U.S. Trade Deficit Falls Slightly in August as Strong Exports Outweigh Record Manufacturing Shortfall

Tags

Canada, Census Bureau, China, European Union, exports, goods trade, imports, Japan, Made in Washington trade deficit, manufacturing, Mexico, non-oil goods trade deficit, oil, recovery, services, South Korea, Trade, trade deficit, Trump, {What's Left of) Our Economy

In August, the combined U.S. goods and services trade deficit declined by 2.67 percent sequentially to hit $42.40 billion – its lowest monthly level since September, 2016’s $38.47 billion. The improvement came even though several typical major engines of trade deficit growth worsened.

A new record was set for the chronic and huge manufacturing trade deficit, with its $82.15 billion August total topping the previous high (last November’s $80.75 billion) by 1.73 percent. The manufacturing-heavy China goods gap, meanwhile, grew to its highest monthly level ($34.89 billion) since September, 2015 ($36.29 billion). And the pre-inflation oil trade deficit, which has decreased dramatically in recent years, staged its strongest monthly rebound (jumping by 60.59 percent) since June, 2016 (60.84 percent). Pointing to a hurricane effect: the biggest monthly drop in current dollar oil exports (11.53 percent) since August, 2015 (12.62 percent).

Boosting the August trade performance was the new all-time high hit for services exports ($66.11 billion), the best overall monthly exports figure ($195.32 billion) since December, 2014 ($197.18 billion), and the best monthly goods exports reading ($129.21 billion) since April, 2015 ($129.72 billion). America’s goods trade deficits with Mexico and South Korea, both of which have been criticized by President Trump, increased sequentially in August (by 25.49 percent and 15.20 percent). And the longstanding Japan merchandise deficit grew by 13.49 percent on month.

But merchandise trade shortfall with Trump trade target Canada plummeted by 61.43 percent month-to-month, and the goods gap with the European Union fell by 7.92 percent. The latest figures on the growth-slowing impact of the Made in Washington trade deficit show that it’s weakened slightly (from slowing the U.S. economic recovery by 17.40 percent as of the first quarter of this year to cutting inflation-adjusted growth by 17.30 percent in the second quarter). The new August trade figures indicate that it might decline modestly again once third quarter GDP and September trade data are released.

Here are selected highlights of the latest monthly (August) trade balance figures released this morning by the Census Bureau:

>America’s combined goods and services trade deficit declined by 2.67 percent on month in August to its lowest level ($42.40 billion) since September, 2016 ($38.47 billion), as a new monthly record manufacturing trade shortfall and poor China and hurricane-related oil results were more than offset by strong export performances, including a new all-time high for services exports.

>The August manufacturing trade deficit of $82.15 billion was 1.73 percent greater than the previous record total of $80.75 billion, set last November.

>August manufacturing exports grew by a solid 6.82 percent on month, to $93.51 billion. But the far larger amount of imports rose by 5.07 percent, to $175.67 billion.

>Year-to-date, the manufacturing trade deficit is running 5.56 percent ahead of last year’s record pace. Manufacturing exports for the January-August period are up 4.04 percent, and imports have increased nearly as fast – 4.72 percent.

>Fueling these manufacturing trade results in August was a 3.99 percent month-to-month widening of America’s manufacturing-heavy trade deficit with China. The $34.89 billion total was the largest monthly figure since September, 2015’s $36.29 billion.

>U.S. goods exports to China improved sequentially in August by an impressive 8.75 percent, but merchandise imports, which are much greater, increased by 5.08 percent.

>Year-to-date, the merchandise deficit with China is 6.24 percent higher than last year’s total – which was the second largest annual figure ever.

>The pre-inflation U.S. oil trade deficit, which has nosedived in recent years thanks to the energy production revolution, rose in August from $3.02 billion to $4.85 billion. That 60.59 percent monthly increase was the biggest such rise since the 60.84 percent surge registered in June, 2016.

>Pointing to the effects of this year’s violent hurricane season, oil exports in August recorded their biggest monthly decrease (11.53 percent) since August, 2015 (12.62 percent).

>On a year-to-date basis, however despite the longer-term improvement, this oil shortfall is outpacing last year’s by a stunning 36.01 percent.

>The hurricane impact on oil was also suggested by the excellent export data produced by other major sectors of the economy.

>Services set a new overseas sales record in August, and reached their second all-time monthly high in the last three months. August’s $66.11 billion bested June’s $65.90 billion by 0.33 percent.

>Total U.S. exports improved by 0.42 percent, to $195.32 billion, and thereby hit their highest level since December, 2014’s $197.18 billion.

>Goods exports rose even faster sequentially in August, by 0.44 percent to $129.21 billion. The result was their strongest month since April, 2015 ($129.72 billion).

>Having set reform of the North American Free Trade Agreement (NAFTA) as a priority, President Trump no doubt noticed that the U.S. merchandise trade deficit with Mexico surged by 25.49 percent on month in August, to $6.18 billion. U.S. goods exports to Mexico were 5.73 percent higher in August than in July, but import growth was 9.68 percent.

>The year-to-date merchandise deficit with Mexico is so far 11.72 percent higher than in the first eight months of 2016.

>America’s merchandise trade deficit with South Korea, which has just this week agreed to substantive talks on modifying its bilateral trade deal with the United States, increased by 15.20 percent sequentially in August, to $2.22 billion.

>U.S. goods exports to South Korea actually sank by 8.21 percent on month – the biggest such decrease since January’s 21.51 percent. America’s merchandise imports from South Korea fell, too, and for the second straight month – but by only 0.70 percent.

>America’s merchandise trade deficit with South Korea is down so far this year by fully 28.07 percent on a year-to-date basis. But since the bilateral trade deal went into effect, in March, 2012, it’s nearly tripled.

>The U.S. merchandise trade deficit with Japan increased notably (13.49 percent) as well on month in August, to $6.55 billion.

>America’s goods exports to the world’s third biggest single national economy decreased by 5.52 percent month-to-month, while its goods imports rose by 4.02 percent.

>Year-to-date, this merchandise deficit with Japan is running 12.54 percent ahead of last year’s level.

>Better news came in merchandise trade with America’s other NAFTA partner, Canada. The U.S. deficit – which has been volatile recently – plummeted by 61.43 percent in August, to just $410 million.

>American goods exports to Canada improved by 12.50 percent. Imports climbed, too, but by only 9.06 percent.

>Year-to-date, though, the U.S. merchandise trade shortfall with Canada is running nearly three times ahead of last year’s rate.

>Improvement in August was also seen in American merchandise trade with the European Union (EU) – the world’s largest economic unit. On a monthly basis, the U.S. deficit narrowed in August by 7.92 percent, to $12.39 billion.

>U.S. goods exports to the EU advanced by 9.08 percent on month, while imports were up only 2.52 percent.

>Year-to-date, moreover, the American merchandise deficit with the EU is running 0.72 percent behind last year’s rate.

>The latest data for the growth drag on the still weak U.S. economic recovery of rising trade deficits are only from the second quarter. But by both major measures, they show that trade’s bite into the expansion is easing, but remains deep.

>Since the recovery began, in mid-2009, to the end of the second quarter of this year, the increase in the trade deficit has reduced cumulative after-inflation output during the expansion by 9.24 percent, or $247.30 billion. That’s down from the 10.04 percent, and $255.9 billion, as of the first quarter.

>The toll on the expansion attributable to U.S. trade policy is diminishing, too, but has been much higher. This Made in Washington deficit strips out of inflation-adjusted American trade flows energy and services – two sectors where trade policy and related decisions have had only marginal effects so far. The remainder of U.S. trade flows – of goods except oil – are heavily influenced by policy.

>Since the recovery’s onset, the rise of this Made in Washington deficit has cost the recovery $462.8 billion in lost growth in absolute terms – or 17.30 percent of the cumulative total. That’s down from a growth bite of 17.40 percent worth ($443.3 billion in absolute terms) for the first quarter.

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

Tags

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.