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Trade Deficits Hit U.S. GDP – Worst for 30 Years

Trade Deficits Hit U.S. GDP – Worst for 30 Years

The third (and presumably last) estimate of U.S. economic growth by the Bureau of Economic Analysis (BEA), released on Wednesday, for first quarter (Q1) 2015, showed a significant hit from current trade deficits. Nearly 2 full percentage points had to be factored into the revised Q1 rate of -0.2%, meaning the economy actually contracted when the disproportionate import and export figures were added to the balance sheet. The International Monetary Fund (IMF) has been quoted recently as describing the U.S. dollar as “over-valued” (in the past year, it has risen 15% alone), and, because of this valuation, exports reduced by 5.9%, as our goods appeared more costly abroad. The further hit comes for the same reason – imports of cheaper goods rose 7.1%, thus widening the trade gap significantly. The impact upon GDP is the worst for 30 years.

In addition, the BEA report stated that there had been a 2 % contraction in U.S. business investment – the worst since 2009. Subsequently, machinery, construction, and research and development investments were much lower, hitting the manufacturing sector at an obvious bad time.

If you, too, believe the dollar’s “over-valuation” on the global markets is affecting any hope of a resurgent U.S. economy, please Like & Share this post.

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