New GDP Data Confirm Trade Bolstered Quarterly Growth but Still Undermining Sluggish Recovery

Alan Tonelson |

The new GDP revisions released today by the Commerce Department revealed a further marginal quarterly improvement in America's trade flows that translated into a slightly bigger contribution to second quarter growth than originally estimated. This performance contrasted dramatically with the record relative bite taken by trade from growth in the first quarter, due partly to severe weather and West Coast ports labor issues. The latest revisions still left all import categories, and services exports, at new records, however, and show that net trade has remained a major drag on the current historically sluggish recovery.

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

  • Today's GDP figures, which present revised figures for the second quarter of 2015, show that a slightly narrowing after-inflation trade deficit modestly boosted the latest U.S. economic growth readings over last month's initial estimate, and contributed just as modestly to the economy's second quarter sequential improvement.
  • Nonetheless, although this morning's revisions also brought down the second quarter's total imports and goods imports levels, they still remained at all-time highs in absolute terms. Services imports, which were revised up marginally, are also at record levels, along with services exports.
  • Moreover, the inflation-adjusted quarterly trade gap ($541.2 billion) was still the nation's second highest since the second quarter of 2008 ($550.4 billion) – near the outset of the Great Recession. As a result, the trade shortfall's widening remained a major drag on the historically weak U.S. recovery since it technically began in mid-2009.
  • The new second quarter real trade deficit of $532.7 billion represented a small decrease from last month's initially reported $536.3 billion figure, and was 1.57 percent lower than the first quarter level.
  • An improvement in the trade balance fuels growth on net. As a result, the revised second quarter data show that net trade contributed 0.23 percentage points to that period's annualized 3.70 percent inflation-adjusted growth. The previous second quarter statistics reported a 0.13 percentage point contribution to 2.30 percent growth. In the first quarter, a trade deficit worsened in part by severe winger weather and West Coast ports labor troubles subtracted 1.92 percentage points from 0.60 percent annualized real growth – the biggest relative hit on record.
  • Including the new second quarter data, the growth of the inflation-adjusted trade deficit has slowed the pace of the current recovery by 8.45 percent
  • Yet it's important to note that this figure includes the dramatic recent improvement in America's energy trade. Excluding those flows, along with services trade, produces the trade balance heavily influenced by trade policies and deals such as President Obama's proposed Pacific Rim agreement.
  • According to the Census Bureau's separate monthly U.S. trade data, the growth of this non-oil goods deficit has now cut recovery-era growth by a whopping 20.69 percent after inflation.
  • The new second quarter data revealed that U.S. total imports reached $2.6505 trillion at an annual rate on an inflation-adjusted basis, down from the $2.6550 trillion reported in the initial estimate, but still a record. The new import total was 0.68 percent higher than the first quarter's total – which was the old record.
  • Annualized goods import totals were also revised down – from $2.1807 trillion to $2.1754 trillion, but that amount also broke the first quarter's former record of $2.1611 trillion by 0.66 percent.
  • Services imports at annual rates were revised up this morning, from $472.7 billion to $473.5 billion. That level is 0.79 percent higher than the first quarter's previous record of $469.8 billion.
  • Real exports, which were not at record levels, were revised down as well in the new second quarter data. Total annualized exports after inflation were judged to be $2.1179 trillion, fractionally lower than the initial $2.1187 trillion estimate. That performance, however, still represents a 1.27 percent gain over the first quarter figure, and the second highest figure on record (just behind the fourth quarter's $2.1239 trillion).
  • Total goods exports for the second quarter were revised down from $1.4529 trillion to $1.4520 trillion, and 1.59 percent greater than the first quarter total. The scale of the upward services export revision was comparable – $664.6 billion to $664.7 billion. But that 0.62 percent sequential advance enabled quarterly real services exports to reach an all-time high as well.

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