CHART OF THE WEEK
Net foreign trade had weighted heavily on Q4 GDP growth, cutting more than one percent from the annualized growth rate. Data for Q1 2018 show a small positive contribution. As the chart below shows, this is the result of the stabilization of imports after the significant increases in the previous quarter and still strong exports. In March, lower imports (-1.6% in volume) and the rise of exports (+2.9% in volume) shrunk the deficit by almost $9bn to $49bn, an historically large monthly variation.
OUR ANALYSIS
As mentioned in our first chart of the week for 2018, the normal trade pattern in the latest part of the economic cycle is for exports to accelerate as the rest of the world catches up with the US. March data are closer to this norm.
In the short term, March data could point to a strongly positive trade contribution to Q2 GDP growth. As consumption also rebounded in March, after two negative months, growth numbers should be very strong in Q2.
What will be the medium-term macroeconomic impact of what looks like a significant budgetary stimulus ? Will greater domestic demand result in higher domestic production or higher imports ? This is an open question.
The opinion expressed above is dated 9 May 2018 and is liable to change.
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