How U.S. economic strength was a drag on Q1 GDP 🤯
U.S. imports outpaced exports to weaker trading partners 🇺🇸
Exactly two years ago, I wrote: How U.S. economic strength caused GDP to decline in Q1 🤯.
It appears the economy and the data are once again portraying a similarly confounding dynamic.
According to preliminary Bureau of Economic Analysis (BEA) data released on Thursday, U.S. GDP grew at an annual rate of 1.6% in Q1. This is down significantly from the 3.4% rate in Q4.
However, this sharp slowdown belies the underlying strength of the U.S. economy.
Much of the story can be explained by a single stat: Net exports subtracted 0.9 percentage points from GDP.
The magnitude of the impact is illustrated nicely by the red bar in the chart below from Joseph Politano, author of Apricitas Economics.
When net exports are negative, it means U.S. import growth is outpacing its export growth. Indeed, imports jumped 7.2%, while exports grew at a more modest 0.9%. Maybe the U.S. economy is just a lot stronger than its international trading partners.
