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US trade deficit a drag on US GDP

The US trade deficit widened by $191.6 billion to $1.541.7 billion in the first quarter, imposing the largest drag (3.2 percentage points) of all components of GDP growth.

While total exports of goods and services fell 5.9% at the annual rate, total imports of goods and services increased 17.7 percent.

Nominal exports increased in the quarter, but real exports fell due to a sharp increase in the export price index.

On the other hand, total government spending in the United States decreased 2.7% at an annual rate in the first quarter, almost matching the decrease in the previous quarter.

Meanwhile, federal government consumption and investment accounted for about 80% of the decline, largely concentrated in national defense purchases: defense spending shrank 5.9%, the fourth consecutive quarterly loss.

Trade deficit

Also, according to the Treasury Department, consumption by state and local governments decreased 0.8% in the first quarter, half the decrease in the fourth quarter.

Like exports, these real declines reflected large increases in the price index for consumption and government investment.

On the other hand, the change in private inventories (CIPI), a volatile component, was the second biggest drag on real GDP growth in the first quarter, subtracting 0.8 percentage points, a sharp contrast with the addition of 5.3 percentage points made in the fourth quarter.

Although companies continued to build inventories in the first quarter at a healthy pace, it was at a slower pace than in the fourth quarter.

Inventories tend to be a volatile component of GDP; In the first quarter, the slowdown was driven by declines in inventories at durable goods wholesale and other retail stores, which were partially offset by higher inventory builds at manufacturers.

 

Redacción Opportimes

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