Tuesday, August 12, 2008

Exports outpace GDP: The US is back!

Today, the Census Bureau released its June report for exports of goods and services. The report indicates that real export growth outpaced GDP growth.

Let’s be clear on what this means: monthly real export growth is greater than quarterly GDP growth that is turned into an annual number. This is great news, and exports are keeping the US alive.

Some argue that export-driven growth does not have the same kind of effect as if the economy was being driven by consumption or investment (those sectors influenced by expansionary policy). The US, “may have just completed one of the most unsatisfying 3%-growth quarters ever.”

And another quote: “In a technical sense, [export and domestic demand] are created equal, but just in the sense of judging the health of the economy they’re not created equal,” said Abiel Reinhart, economist at J.P. Morgan Chase.”

How could strong export growth possibly be bad? In my book, this is leaving out a lot of positives regarding export growth (which you can see has not occurred at this rate at least since 2002). In a technical sense, both exports and domestic demand (investment, consumption, and government spending) are created equal in judging the health of the future economy.

As exports grow, the economy will invest in the most productive sectors, which will result in higher potential growth in the future. Stronger exports and higher productivity means increased growth and minimized inflation pressures; higher incomes; more jobs; more spending money. I am simply not seeing a the downside to export-driven growth today or in the future.

Please leave comments. Best, Nontruths

No comments:

Post a Comment