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Despite the better-than-expected first half economic performance revealed in today’s gross domestic product data, the statistics also show that the trade deficit was even higher in the first quarter than originally reported, largely on record imports. This rebounding trade gap continued to reduce the recovery’s already sluggish growth through the second quarter – by more than six percent since its official mid-2009 onset.
The new GDP data reveal that the trade debacle reported in the previous estimate for the first quarter was even worse than expected, with the annualized real trade deficit rising not to $441.1 billion on an annualized basis, but to $447.2 billion. Annualized real exports fell by 9.2 percent, not the 8.9 percent first reported, while imports rose by 2.2 percent, not the 1.8 percent first reported. The fourth quarter 2013 trade deficit was $384 billion annualized.
The preliminary second quarter figures show that the trade deficit climbed even higher between March and June, to $470.3 billion on an annualized basis – the highest such figure since the third quarter of 2010. Real U.S. exports surged by 9.5 percent in the second quarter, but imports soared even faster – by 11.7 percent.
Second quarter real imports of $2.544 trillion (annualized) represent a new all-time U.S. high. The export total of $2.073 trillion was the second highest on record, meaning that America’s overseas sales after inflation still remain below their $2.077 trillion fourth quarter, 2013 level.
The widening of the U.S. trade deficit from $366.3 billion in the second quarter of 2009 means that worsening trade flows have reduced the American economy’s cumulative growth during the current economic recovery by 6.38 percent. Worse, nearly all this damage has come in the private sector.
Doubtless greater still has been the growth-killing impact of U.S. trade flows affected heavily by trade agreements and other American trade policy decisions, since these new quarterly figures also include a dramatically shrinking trade shortfall in energy products.
A more complete analysis of the impact of trade policy on economic growth will be possible next week, when the June monthly trade figures are released. The prior May figures, however, revealed that the policy-driven trade deficit had hit a new monthly record in inflation-adjusted terms ($48.96 billion).
The new GDP figures also make clearer than ever the hubris of President Obama’s export-doubling goal. Mr. Obama believed that his efforts could help America’s overseas sales rise by 100 percent between the first quarter of 2009 (when he began his presidency) through the end of 2014. With 2014 now half completed in a data sense, real U.S. exports during this period are up only 35.04 percent.
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