Tuesday, August 12, 2008

Export growth is keeping the US alive: Q2 revisions will be upward!

International Trade

Trade Balance
Expectations: -$62.0 billion deficit
Previous (May): -$59.8 billion
Today’s release (June): -$56.8 billion

Today’s trade report was good. The trade deficit narrowed substantially, led by increased export growth. Recent US exports have been growing at a faster rate than the overall economy, which is keeping the US alive. Exports grew 4% on a monthly basis, and imports grew 1.8%. Export growth outpacing annual GDP growth (1.9% in Q2) on a monthly basis.

A closer look

The trade data, along with construction and inventory data imply an upward-revision of Q2 GDP estimates (the preliminary release).The Bureau of Economic Analysis, the government agency in charge of the national accounts, assumed that the June trade deficit on goods would be -$72.5 billion. The actual data revealed a goods deficit that was $2.5 billion lower, or -$70 billion, which will add to Q2 economic growth estimates.

The revised estimate of Q2 GDP will be in the 2.5%-3.0% range (on an annualized basis), up from 1.9%. The trade data is good – export growth is good – the US economy remains quite resilient.

Notes on revisions

The May number was revised up to -$59.2 billion, a $0.6 billion improvement over the last estimate. Again, this will add to the upward Q2 GDP revisions.

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