Export Sector is 2X As Big as the Housing Sector
Wall Street Journal: Robert Gordon, an economist at Northwestern University in Illinois who is also a member of the National Bureau of Economic Research committee that determines (usually long after the fact) when recessions begin, is hopeful that overseas growth may continue to bolster the U.S. economy. He notes that exports, which have been growing rapidly and account for more than twice as large a share of GDP as home construction does, will continue to post strong growth, easing the pain of the housing decline.
The chart above (click to enlarge) using BEA data (via the St. Louis Fed) verifies what Robert Gordon is saying: The export sector of the U.S. economy is more than twice as large as the residential housing market, and continued strong export growth will help absorb some of the weakness in the much smaller housing sector.
Exports in 2007 were up by 55% from 2003, the strongest 4-year period of export growth since 1991; and from November 2006 to November 2007, exports of goods increased by almost 14% and service exports increased by 11.4%. The strong economic growth forecast for 2008 in countries like India (8.4%), China (10%), Vietnam (8.2%), Russia (6.5%), should continue to provide strong demand for U.S. exports, and help offset the sluggish growth expected here.
4 Comments:
Real exports boosted GDP by 2.18% in Q3.07, Table 2 - Gross Domestic Product - Third Quarter 2007 Final. It was an excellent offset to negative residential investment (RI).
However, the October, November data Table 11 - U.S. International Trade in Goods and Services November 2007 is not very kind thus far for Q4.07 in support of the theory that net exports will further offset RI. Real exports are flat. Those darn chained dollar deflators.
I am sure that you are aware of Roubini's Recoupling Theory which posits that emerging economies, even Europe, will import less from the US in a US growth (or outright) recession.
As goes housing - so goes the economy.
As goes the US - so goes the world.
What's good for the US is good for the world.
Sorry this time isn't any different. Global recession dead ahead.
Are exports being counted on a revenue basis, or on a value-added basis? That is, if I import $8K worth of parts for my product, assemble it, and export it for $12K..does this contribute $4K or $12K to the number?
David -
Imports would be backed out of GDP while the value add would be a plus in the measure of GDP. So the net gain to GDP would be $4k.
Your old pal from P7 - Darryl
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