Thursday, September 8, 2011
The ongoing expansion of U.S. exports continues to be very impressive. As the top chart shows, exports have been growing at strong double-digit rates for over two years, recovering their former pre-recession growth rates and far surpassing their pre-recession high levels. Exports are now at an all-time record 13.3% of GDP, which is almost triple the size of just 25 years ago. This is the mark of an economy that is truly "globalizing."
For the bean counters (hint: whether we have a trade surplus or deficit is largely irrelevant to the overall health of the economy), imports have not grown relative to GDP for quite a few years (a reflection of generally weak domestic demand), while exports continue to grow (a reflection of strong global demand); thus net exports have made a significant contribution to GDP. Reminder to all: given that our imports still exceed our exports (i.e., we still have a trade deficit), if foreigners were to stop purchasing our debt, then they would have no alternative but to purchase more of our goods and services and/or more of our stocks and/or more of our real estate. All the money foreigners earn by selling us goods and services must, at the end of the day, be spent on something here in the U.S. So the concerns that, for example, China might stop purchasing massive quantities of our federal debt are misplaced, since if that were to happen then it is very likely that our exports would increase.
Posted by Scott Grannis at 8:43 AM