U.S. trade likely to modestly drag GDP growth in coming quarters

In November, the U.S. trade deficit had widened to USD 50.5 billion, recording the first time that the deficit surpassed USD 50 billion since March 2012. There was widespread strength on both the export and import side of the ledger. In the September to November period, the value of exports rose 6 percent year-on-year.

Given that, the overall exports have evidently recovered in 2017 after experiencing softness in 2016. Similarly, import growth had bolstered in 2017, consistent with higher commodity prices, but more significantly because of an up-tick in domestic demand.

The solid levels of exports and imports were anticipated to cause real net exports to be a drag on the fourth quarter economic growth. The advance GDP report released last week, disclosed net exports negatively contributing 1 percentage point to the overall GDP growth in the fourth quarter.

“We expect a modest drag from trade to continue for the next few quarters”, stated Wells Fargo in a research report.

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