As noted by Jim in his post on the 2022Q3 GDP release, exports and imports accounted (mechanically) for more than 100% of 2022Q3 GDP growth:
Figure 3: Real US dollar trade weighted currency exchange rate in logs, lagged two years (blue, left scale), net exports to GDP (tan, right scale), net exports ex-agriculture, ex-oil, to GDP (green, best scale). NBER peak-to-trough economic crisis dates shaded gray. Down in exchange rate represents dollar gratitude. Trade weights exports of goods through 2015, exports of products and services thereafter. Source: Federal Reserve via FRED, BEA 2022Q3 advance, author, and nbers calculations.
The rebound in Q3 is in part attributable to the weakening of the currency back in 2020Q3. This graph shows that net exports will probably deteriorate once again in the near future as dollar gratitude feeds through into degrading competitiveness.
Exports also depend upon foreign financial activity, as talked about in these posts. This is shown in Figure 3 listed below.
Figure 4: US exports of goods and services, bn.Ch.12$ SAAR (blue, best log scale), rest-of-world export weighted GDP (tan, right log scale). Source: BEA 2022Q3 advance, Dallas Fed Database of Global Economic Indicators.
The long run relationship in between exports (expgs), rest-of-world GDP (y *) and the real currency exchange rate (q) is:
expgs = 1.1 y * + 1.43 q.
For 1986-2022Q2, estimated utilizing Johansen maximum possibility method. This is a slightly lower income elasticity and higher price flexibility than reported in Chinn (2010 ), however encompasses a later sample than reported there.
We can reveal the geographical contributions to q/q changes in products exports, a minimum of through Q2.
Heres a photo of net exports (overall, ex-agric. Figure 3: Real United States dollar trade weighted exchange rate in logs, lagged 2 years (blue, left scale), net exports to GDP (tan, right scale), net exports ex-agriculture, ex-oil, to GDP (green, right scale). Trade weights exports of goods through 2015, exports of goods and services thereafter. Far, Canada and European Union has contributed measurably to exports of goods. A downturn in the European Union must then be more worrisome insofar as there is a direct impact on United States exports of items.
Figure 1: Top panel: GDP development (blue); Bottom panel: federal government, financial investment and intake spending (blue bar), exports (tan), imports (green), all in %, q/q SAAR. Source: BEA, 2022Q3 advance release and authors calculations.
Boost in genuine exports of services and goods, and decreases in real imports, represented 2.8 ppts of the 2.6 ppts of growth, q/q SAAR. Domestic parts (C, I, G) fell from a big factor of total growth in 2021 Q4, to a small negative in Q3.
Simply put, the domestic component of aggregate need is waning in strength, and this is even more confirmed by an image of q/q development in last sales to private domeestic buyers, as compared to GDP.
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Figure 2: Real GDP growth (blue), GDPNow forecast of 10/28 (sky blue square), genuine development of last sales to personal domestic purchasers (tan), all in %, q/q SAAR. Source: BEA, 2022Q3 advance release, Atlanta Fed, and authors computations.
How is the external environment most likely to impact GDP? Heres a photo of net exports (overall, ex-agric. exports, ex-oil) to GDP, against the development of the real dollar exchange rate.
Figure 5: Change in nominal exports of services and goods (blue), of items (black), goods to remainder of the world (gray bar), European Union (green bar), Canada (blue bar), Mexico (tan), China (red), in billions $, q/q SAAR. Source: BEA 2022Q3 advance, BEA/Census International Trade release, authors calculations
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While we (appropriately) stress over China, the direct aggregate need emanating from China for United States products is little (the indirect, through the remainder of the world is most likely not so trivial). Far, Canada and European Union has actually contributed measurably to exports of items. A downturn in the European Union ought to then be more worrisome insofar as there is a direct influence on US exports of items.
October 2022 IMF World Economic Outlook projections are for 2.2%, 1.3% for Canada in 2022, 2023, 2.4%, 1.2% for Mexico, 1%, 1.4% for Euro Area (not EU), and 4.3% and 2.6% for China
