New GDP Figures Confirm Slight Sequential Trade Improvement but Gap's Toll on Recovery Greater than Ever

Alan Tonelson |

Today’s final (for now) second quarter GDP revisions confirm a small sequential improvement of the inflation-adjusted U.S. trade deficit and a strong turnaround in terms of trade’s contribution to growth. But the second quarter figures were not nearly good enough to prevent U.S. trade flows from representing a big drag on America’s real growth during an already weak recovery, and the cumulative growth hit that can be blamed on trade policy now exceeds 20 percent. The second quarter numbers also revealed that although real export growth is still sluggish, real imports are at all-time quarterly highs.

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

  • Today’s GDP figures, which present the final (for now) numbers for the second quarter of 2015, show that trade’s growth role remained roughly the same as that revealed in the previous revision – and a major improvement over the first quarter results.
  • Yet the slowing of real total U.S. export growth reported in these new second quarter statistics, along with a new quarterly record for overall U.S. imports, meant that America’s trade performance remained a big drag on the nation’s growth throughout a sluggish recovery.
  • This latest second quarter revision pegged the inflation-adjusted goods and services trade deficit at $534.6 billion – a bit higher than the previously estimated $532.7 billion, but a good deal lower than the first quarter’s $541.2 billion shortfall.
  • The new second quarter trade deficit figure was still the second highest since the $550.4 billion registered in the second quarter of 2008.
  • As a result, trade’s contribution to second quarter growth was revised down fractionally – from 0.23 percentage points of an overall 3.70 percent annualized advance to 0.18 percentage points of a 3.90 percent gain.
  • The second quarter performance represents a significant turnaround from that of the first quarter, when trade subtracted 1.92 percentage points from 0.62 percent growth – the biggest relative hit on record.
  • At the same time, the new GDP figures show that the growth of the inflation-adjusted trade deficit has slowed 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 8.51 percent greater – $168.3 billion on an annualized basis.
  • Moreover, 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, its increase has cut cumulative recovery-era growth by fully 20.05 percent. Had it simply held steady, cumulative recovery real growth would have been nearly $397 billion greater on an annualized basis through the end of the second quarter.
  • According to the new second quarter data, U.S. total imports reached $2.6521 billion annualized after inflation – a new quarterly all time high. That figure was slightly bigger than the previously reported $2.6505 billion figure and 0.74 percent greater than the first quarter’s $2.6325 billion level.
  • Annualized goods import totals were revised slightly upward in this morning’s release – from $2.1754 trillion to $2.1784 trillion, which was also a new record. This total was 0.66 percent higher than the prior all-time quarterly record of $2.1611 trillion, set in the first quarter.
  • Services imports at annual rates were revised down from $473.5 billion to $472.1 billion, but that figure still represented a record, and a 0.49 percent increase from the previous all-time high of $469.8 billion, also set in the first quarter.
  • Real exports, which were not at record levels, were revised down further in the new second quarter data. Total annualized exports after inflation were judged to be $2.1175 trillion, not $2.1179 trillion. This new total is 1.25 percent better than the $2.0914 trillion figure for the first quarter, but still off the record of $2.1239 trillion, set in the fourth quarter of last year.
  • Total goods exports for the second quarter remained at $1.4520 trillion – 1.59 percent greater than the first quarter total. But services exports were revised down from $664.7 billion to $664.4 billion annualized. Nonetheless, that 0.58 percent sequential advance means that real services exports remain at their all-time quarterly highs, too.

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