GDP Revisions Show Faster Growth but Bigger Trade Bite

Alan Tonelson  |

Trade's drag on recent economic growth and on the current economic recovery increased in the third quarter of this year, according to today's first revision of the July-September gross domestic product (GDP) figures – although growth itself accelerated. Since the recovery began in mid-2009, the real trade deficit's continued rebound has now cut cumulative inflation-adjusted U.S. growth by 8.62 percent – or nearly $178 billion on an annualized basis. The new GDP figures also showed that the after-inflation trade deficit in the third quarter hit its highest level since early 2008. In addition, real overall exports retreated from the new quarterly record levels revealed in the previous GDP figures, but the new record reported for real overall imports rose even higher. The new record set by goods imports increased as well, and despite small downward revisions to each, levels of services exports and imports remained at all-time highs.

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

>Today's GDP figures, which present the second read on the third quarter of 2015, show that trade's impact on American economic growth was more damaging than reported in the initial estimate.

>According to the new GDP figures, the third quarter inflation-adjusted goods and services trade deficit hit $544.1 billion on an annualized basis – higher than the second quarter's final (for now) $534.6 billion, and the worst such figure since the $550.4 billion registered in the second quarter of 2008.

>As a result, trade's impact on growth changed from a net contribution of 0.18 percentage points of a 3.90 percent annualized gain in the second quarter, and an initially reported 0.03 subtraction from a 1.50 percent third quarter gain, to a 0.22 percent subtraction from a 2.10 percent increase.

>Moreover, the new GDP figures show that the growth of the inflation-adjusted trade deficit has continued to slow the overall economy's real growth since the current weak recovery began in mid-2009. Had the trade shortfall simply held steady, the economy's cumulative expansion would have been 8.62 percent greater – $177.8 billion on an annualized basis.

>Separate figures (from the Census Bureau) show that the recovery drag of that portion of the trade deficit strongly influenced by trade deals and related policies – the real non-oil goods deficit – has been much greater. Since the second quarter of 2009 through the third quarter of 2015, its increase has cut cumulative recovery-era growth by fully 24.36 percent. Had it simply held steady, cumulative recovery real growth would have been nearly $502.37 billion greater on an annualized basis through the end of the third quarter.

> The new third quarter data revised total U.S. inflation-adjusted exports down from $2.1275 trillion annualized to $2.1221 trillion. The previous figure was a record. The revised figure is below the all-time high of $2.1239 trillion (achieved in the fourth quarter of 2014). Combined real goods and services exports in the second quarter were $2.1175 trillion – 0.22 percent lower.

>Yet the greater amount of total real imports reached record territory again, too. At $2.6662 trillion, it was 0.53 percent higher than the second quarter's $2.6521 trillion – the former high. 

>Annualized real goods exports for the third quarter were revised down as well – from $1.4545 trillion to $1.4502 trillion. As a result, whereas the initial set of third quarter figures showed a goods exports increase over the second quarter total ($1.4520 trillion), the revisions show a sequential decrease. Goods exports peaked in the fourth quarter of 2014 at $1.4743 trillion.

>The revisions, however, kept intact the record for annualized inflation-adjusted goods imports initially reported for the third quarter – and modestly increased the total. Previously reported at $2.1823 trillion annualized, the third quarter amount is now pegged at $2.1853 trillion.

>The new records set for real services exports and imports both remained intact in the new third quarter figures as well, although both were revised slightly lower.

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