Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Article: U.S. Gross Domestic Product WASHINGTONThe trade deficit in goods widened for the fourth month in a row in September, the Commerce Department said Thursday.

Article:

U.S. Gross Domestic Product

WASHINGTONThe trade deficit in goods widened for the fourth month in a row in September, the Commerce Department said Thursday. A widening trade gap is typically a drag on the measure of gross domestic product. A separate Commerce Department measure of demand for long-lasting manufactured goods rose in September due to a big increase inmilitary aircraft orders(Links to an external site.)

. Excluding defense, durable-goods orders fell, and a narrower proxy for business investment declined for the second straight month.

The latest data, which the government will release Friday, isn't expected to significantly recast GDP figures for the third quarter but it could hint at a slowdown in growth during the final three months of the year. Economists surveyed by The Wall Street Journal project that economic output expanded at a 3.4% annual pace in the July through September period. Many forecasters expect the growth rate to slip below 3% in the fourth quarter.

The trade deficit has widened throughout the third quarter. The latest data showed the trade deficit in goods climbed to $76 billion in September.

Both the deficit in goods and the overall trade deficit had come down in the second quarter, contributing to that quarter's robust 4.2% growth. During the second quarter, the trade deficit in goods was averaging $66.7 billion per month, and the administration touted smaller deficits as a sign that its trade policies were working.

Some of the gains for U.S. exporters in the second quarter proved temporary.Soybean exports(Links to an external site.)

, for example, had surged earlier in the year, driven by producers rushing their exports out of the country before tariffs between China and the U.S. went into effect over the summer. Food exports dropped by 9% in both August and September.

Overall exports have risen slightly, but imports have risen even more, causing the trade balance to deteriorate. U.S. imports in September rose by the most in seven months.

"Fiscal stimulus, upbeat domestic demand and the stronger U.S. dollar keep a steady pull on imports," Jack McRobie and Gregory Daco, economists at Oxford Economics, said in a note.

The drag on GDP growth from international trade last quarter is expected to be largely offset by an increase in business inventories during the quarter. Some firms, including large retailers, have been stocking up in an effort to secure goodsahead of tariffs being imposed(Links to an external site.)

.

That poses a risk to fourth-quarter output growth because firms may draw down inventories rather than increase production to meet consumer and business demand for products.

Meanwhile, orders for durable goods, manufactured products intended to last at least three years, unexpectedly increased a seasonally adjusted 0.8% in September from the prior month, the Commerce Department said. Economists had forecast a decline.

Easing Investment A proxy for business investment, nondefense capital goods orders excluding aircraft, rose last month at its slowest rate since early 2017 Durable goods orders, change from a year earlier.

The gain was largely due to a doubling of military aircraft orders. Excluding defense demand, orders fell 0.6%.

An underlying business-investment gauge, new orders for nondefense capital goods excluding aircraft, edged down for the second straight month. The gauge was up 1.9% from September 2017. That was the smallest year-over-year increase since January of last year.

Tax-law changes(Links to an external site.)

approved late last year were designed to incentivize business investment, and such spending did increase over the past year. However, an easing of such equipment orders raises the question of whether the boost was temporary.

"The real risk for business investment is in the outlook for 2019," said Diane Swonk, chief economist at Grant Thornton. "Uncertainty over the prospect of a full-blown trade war with China and tariffs more generally are prompting some companies to delay investments for next year."

Question 1: According to the lecture video, in the measurement of Gross Domestic Product (GDP) for the United States, does importing from foreign countries add or subtract from the GDP calculation? Why?

Question 2: According to the article, what happened to the Net Exports component of the U.S. GDP? What statement supports your answer?

Question 3: Do you think a higher level of GDP also equate to a higher level of happiness? Why or why not?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Bank Management

Authors: Timothy W Koch, Steven Scott MacDonald, S Scott MacDonald

6th Edition

0324289278, 9780324289275

More Books

Students also viewed these Economics questions

Question

Define self-expectancy and explain two ways to boost it.

Answered: 1 week ago

Question

What is the meaning and definition of E-Business?

Answered: 1 week ago