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Investing Specialists

Is the Worst Over for Troubled Trade Data?

Trade has fallen from close to 14% of GDP to just 12%, a drop that is more typically associated with a recession than a midcycle recovery.

After last week's data whirlwind there is less than usual to talk about. Last week we took a deeper dive on consumption and its main driver, wage income. This week's full-year trade data provides an opportunity to talk about how trade has been affecting GDP. Unluckily, trade has fallen from close to 14% of GDP to just 12%, a drop that is more typically associated with a recession than a midcycle recovery.

While government spending at all levels (about 17% of GDP) is no longer detracting from GDP, it still hasn't provided much of a boost to economic growth. New budget data at the Federal level suggests the current budget situation has improved slightly in 2017, on better revenue collections. And, through the mid-2020s, the Congressional Budget Office dialed back its deficit projections very modestly, but continued to warn that baby boomer retirements followed by growing debt and interest payments will make the debt unsustainable by 2047 if some action isn't taken, hopefully sooner than later.