New GDP Figures Show Trade is Back as a Recovery Drag

Alan Tonelson |

Trade returned to undermining growth according today's first reading on economic growth for the third quarter, but the drag was minimal. More important was trade's continuing role as a growth killer since the current recovery's technical beginning in mid-2009, as the rebound in the deficit has cut the real GDP's cumulative expansion by 8.33 percent. Despite the global economic slowdown and the strong dollar, total real exports grew sequentially in the third quarter, and in fact hit a new record. But so did the inflation-adjusted value of goods and services imports. New quarterly records were also set by goods imports, and by services exports and imports.

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

>Today's GDP figures, which present the first read on the third quarter of 2015, show that trade's impact on American economic growth turned negative once more.

>According to the new GDP figures, the third quarter inflation-adjusted goods and services trade deficit hit $536.2 billion on an annualized basis – slightly higher than the second quarter's final (for now) $534.6 billion.

>This deficit was the second highest 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 to a 0.03 percent subtraction from a 1.50 percent gain.

>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 8.33 percent greater – $169.9 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 through the second quarter of 2015, that shortfall's 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.

>The growth drag of the non-oil goods deficit through the third quarter will be possible to calculate – on a preliminary basis – once the detailed September monthly trade figures are issued by Census early next month.

> According to the new second quarter data, total U.S. inflation-adjusted exports reached $2.1275 trillion annualized – a new record. The previous all-time best was the $2.1239 in the fourth quarter of 2014. Real goods and services exports in the second quarter were $2.1175 trillion – 0.47 percent lower.

>Yet the greater amount of total real imports reached record territory again, too. At $2.6637 trillion, it was 0.44 percent higher than the second quarter's $2.625 trillion – the former high.

>Annualized goods exports barely budged between the second and third quarters – from $1.4520 trillion to $1.4545 trillion. That's still below the quarterly record of $1.4743 trillion annualized recorded in the last quarter of 2014.

>But annual goods imports reached new highs, too. At $2.1823 trillion annualized in the third quarter, they nosed past the previous record of $2.1784 trillion set in the second quarter.

>Real services exports and imports both set new quarterly records as well, with each slightly bettering the previous records set in the second quarter.

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