Don't Get Too Excited About the GDP "Growth"
August 29, 2008
– Comments (4)
Since GDP figures go up when our imports drop... well, I'll let the Financial Times explain it:
Stunned economists were forced to boost their calculations of trade's contribution to US gross domestic product earlier this month after surprisingly strong trade data showed nominal US exports grew twice as fast as imports in June, narrowing the trade deficit by 4.1 per cent to $56.8bn (£31.1bn, €38.7bn). When the government updates its estimate of economic growth for the second quarter today, the figure is expected to be much higher than the 1.9 per cent annualised rate reported at the end of July before the most recent trade data. Consensus yesterday morning among economists was of a 0.8 percentage point gain leading to annualised GDP growth of 2.7 per cent, with some even expecting it to reach as high as 3 per cent. Nowhere is the change more apparent than in the Port of Long Beach in southern California, just south of Los Angeles - the largest in the US and an important shipping gateway to Asia. Between January and July, loaded inbound containers were down 12.7 per cent compared with the same period last year, amid declines in import volumes for a whole variety of goods...
David Rosenberg, an economist at Merrill Lynch, said just before the June trade data was released that declining imports alone contributed 1.3 percentage points to US growth in the second quarter, compared with 1.2 percentage points for rising exports - the first time in five years that falling imports played a bigger role than exports in propping up GDP.
In other words, that "strength" is something of a trick of the import/export net, with weakness in imports (not a signal of great confidence in consumers) now more important than export strength for our "growth."
sj
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