Source: blogs.wsj.com - Friday, January 30, 2015
Imports rose briskly in the fourth quarter while exports rose only modestly, weighing on overall GDP. Getty Images The U.S. economy expanded a disappointing 2.6% in the fourth quarter —about half the summer’s blowout pace of 5%. What happened? In short, blame the U.S. trade deficit. The government’s GDP number reflects everything that’s produced in the U.S. over the past three months, minus the imported goods and services purchased by Americans. The idea is to measure how much Americans’ demand for goods and services is being met within the U.S., rather than by companies abroad. Imports rose briskly in the fourth quarter while exports rose only modestly, weighing on overall GDP. But that’s not an entirely bad thing, because Americans buying iPhones, Hyundais and other foreign-made items signals they are in good financial shape and gaining confidence. The rise in imports also likely reflects the strengthening dollar that has effectively made them cheaper. Thus “net exports”–the difference between exports and imports—subtracted 1 percentage point from today’s headline GDP. Put another way, the economy would have grown at a healthy 3.6% clip, not the sluggish 2.6%, without the trade effect. A measure within the GDP report–real gross domestic purchases—addresses this by showing total spending over the prior period, regardless of where the products were made. For that reason, real gross domestic purchases is a good barometer of underl
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Imports rose briskly in the fourth quarter while exports rose only modestly, weighing on overall GDP. Getty Images The U.S. economy expanded a disappointing 2.6% in the fourth quarter —about half the summer’s blowout pace of 5%. What happened? In short, blame the U.S. trade deficit. The government’s GDP number reflects everything that’s produced in the U.S. over the past three months, minus the imported goods and services purchased by Americans. The idea is to measure how much Americans’ demand for goods and services is being met within the U.S., rather than by companies abroad. Imports rose briskly in the fourth quarter while exports rose only modestly, weighing on overall GDP. But that’s not an entirely bad thing, because Americans buying iPhones, Hyundais and other foreign-made items signals they are in good financial shape and gaining confidence. The rise in imports also likely reflects the strengthening dollar that has effectively made them cheaper. Thus “net exports”–the difference between exports and imports—subtracted 1 percentage point from today’s headline GDP. Put another way, the economy would have grown at a healthy 3.6% clip, not the sluggish 2.6%, without the trade effect. A measure within the GDP report–real gross domestic purchases—addresses this by showing total spending over the prior period, regardless of where the products were made. For that reason, real gross domestic purchases is a good barometer of underlfrom Top News on RSS Feeds http://ift.tt/1yLGC7r
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