Stronger imports, a good sign for Q4 NGDP

You may have seen headlines on Tuesday, about how US imports for October jumped to “record highs”. For the month of October, nominal US imports increased to $45.2 billion, seasonally adjusted, up 5.8% year-over-year. The financial press are keen to write about trade reports, but almost without exception miss the implications of a widening or narrowing US trade deficit. The financial press, even prestigious outlets with expensive subscription fees, will claim that greater imports mean lower GDP. Witness, the Wall Street Journal on December 5th: “The U.S. trade deficit widened in October largely because of a slowdown in exports and… Read More


As the economy "shrinks", so do imports

Liberty Street, the blog of the New York Fed, takes a stab in figuring why imports have slumped of late. They conclude: This analysis suggests that the recent slump in import growth is primarily a reflection of weakness in other parts of the U.S. economy rather than specific factors relating to the cost of international trade.  It´s not complicated. The main determinant of imports is domestic real growth. So, when domestic growth is faltering imports will contract, despite the large change in the terms of trade due to the strong dollar appreciation. In short, the income effect “trumps” the terms of trade effect. In… Read More