I noted earlier that the oddity of imports versus exports calculation would produce a positive contribution to GDP. Let’s look at the details of this, and find a way to understand what this means.

First, off conceptualize the difference between what imports and exports are. At the most basic level, Imports represent our consumption of overseas production, i.e., We buy what they make.

Exports are where overseas consumers purchase our production, i.e., They buy what we make.

What were the specifics of the GDP data regarding import/export?

-Real imports of goods and services decreased 15.1%

-Real exports of goods and services decreased 7.0%

So in Q2, both consumption by us of overseas goods and services and by them of US made goods and serivces declined significantly.

The Differential between imports and exports — who dropped fastest — was the key to this quarter’s GDP data.

According to Bloomberg, Decreasing Exports subtracted 0.76% from GDP. At the same time, falling Imports added 2.14%.  Net contribution of the fact that Imports are free falling twice as fast as Exports are = 1.38%.

If they were both falling at the same rate — if Europe and Asia’s consumers were hurting as much as ours –  GDP would have been -2.38%.

If it seems weird to you that the ratio of domestic and overseas shrinking economies and their reduced consumption somehow turned into a positive GDP contributor, well, welcome to the wonderful world of government statistics.

Category: Data Analysis, Economy, Finance

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

52 Responses to “Falling Imports versus Falling Exports (GDP = -2.38%)”

  1. Alex Tanzi says:

    U.S. Contribution to Change in Second Quarter GDP (Table)
    2009-07-31 12:30:00.862 GMT
    By Alex Tanzi
    July 31 (Bloomberg) —

    The following table shows the major components of second quarter Gross Domestic Product, and how much each contributed to overall GDP, on an annualized basis.

    The major categories of GDP are personal consumption, gross private investment, net exports and government consumption. By adding up all positives and subtracting the negatives, these categories will equal overall GDP, though rounding errors may occur.

    2Q 1Q 4Q 3Q 2Q 1Q 4Q
    2009 2009 2008 2008 2008 2008 2007
    Change in inventories -0.83% -2.36% -0.64% 0.26% -1.25% -0.21% -0.63%
    Farm 0.07% 0.05% 0.10% -0.09% 0.34% -0.29% 0.03%
    Nonfarm -0.89% -2.41% -0.74% 0.35% -1.59% 0.08% -0.66%
    Net exports 1.38% 2.64% 0.45% -0.10% 2.35% 0.36% 2.24%
    Exports -0.76% -3.95% -2.67% -0.48% 1.47% -0.02% 1.65%
    Goods -0.68% -3.41% -2.50% -0.17% 1.17% 0.34% 0.97%
    Services -0.09% -0.54% -0.17% -0.31% 0.30% -0.36% 0.68%
    Imports 2.14% 6.58% 3.12% 0.38% 0.88% 0.38% 0.60%
    Goods 1.82% 6.25% 3.09% 0.55% 0.67% 0.46% 0.51%
    Services 0.32% 0.34% 0.03% -0.17% 0.21% -0.08% 0.08%
    Government consumption 1.12% -0.52% 0.24% 0.95% 0.71% 0.51% 0.31%
    Federal 0.82% -0.33% 0.49% 0.93% 0.55% 0.56% 0.19%
    National defense 0.67% -0.27% 0.20% 0.93% 0.34% 0.39% 0.03%
    Consumption 0.52% -0.22% 0.15% 0.81% 0.10% 0.27% 0.03%
    Gross investment 0.15% -0.05% 0.05% 0.13% 0.24% 0.11% 0.00%

    U.S. Commerce Department, http://www.bea.gov.

  2. call me ahab says:

    hmmm . . . well it would appear that the consumer has cut down signigicantly on “Made in China”-

    not so good for China- I would think- since their entire economy is built around exporting to the USA

    China will be a disaster unless consumer’s resume spending- more stimulus in the from of rebate checks to consumers will be the likely prescription-

    as Bush said- and Obama will follow- “go out and buy something”

  3. JustinTheSkeptic says:

    I guess if we consume less today it means that we can consume more tomorrow, and that is positive for the economy. But is it really? When are we going to come to the realization as a group that there is more to life than burning up the world’s resources? No, you go ahead big conglomerates, keep making all those disposible products, (and I am talking more than just non-durables…planned obsolescence is the main stay of corporations everywhere). Oh and you Almighty Washington keep stoking the budget deficit fire with money you do not have, so the people stuck having to pay for your terrible judgement can go on believing in your falsehoods.

  4. grunge101 says:

    Perhaps we should go back to reporting GNP (Gross National Product).

  5. noilifcram says:

    There is a positive to this: fewer imports mean the US needs to borrow less from other countries to pay for its consumption.

  6. The Curmudgeon says:

    BR…this is actually about the only part of the GDP calculation that I understand. I get that the difference between imports and exports is relevant, if only because it can be assumed that the income produced by an import goes elsewhere, whereas the income of an export stays here, even if all these
    hard-line distinctions are rather fuzzy in reality.

    What befuddles me, and I’m not a novice at understanding economic reasoning, is the owner’s equivalent rent, the imputation of rent that an owner would pay were he renting his house but that he’s not paying since he owns the house. They claim the justification for including this fantasy number is because it puts homeownership on the same basis as renting. Why not use the rent on money that is used to buy the house (interest) as the relevant metric? I’ve mulled this over again and again and can’t find anyplace where the logic is sound.

    And actually, the whole imputation of income is suspect in my view. They do it not only for OER, but also for bank goodies that arrive via a higher interest rate being charged, e.g., and a variety of other things.

    Where to draw the line? Why not impute the value of sexual relations in a marriage by polling local prostitutes? Perhaps they would find renting is cheaper than owning.

    In any event, imputation, i.e. creating a fantasy value for economic transactions not done with dollars (the value of which is itself suspect) it speaks to the fallibilty of the exercise.

  7. Sekar says:

    There is a positive to this: fewer imports mean the US needs to borrow less from other countries to pay for its consumption

    Yes. Now we just borrow more to finance debt. Take a look at the size of treasury auctions. Tax receipts are down anywhere from 20-40% at state levels. That will translate to more and higher amounts of treasury auctions in order to keep the game going.

  8. Onlooker from Troy says:


    Yes, that just goes to show the diminishing returns as you borrow more and more, drowning the the debt. But we’ve been sold the myth that the deficits don’t really matter because of “complicated macroeconomic things that the uneducated regular people just don’t understand”, and that we’ll grow out of them, of course. And that we “can’t afford not to borrow more now” or our economy won’t grow. Endless B.S. that’s really just greedy, spoiled, ignorant behavior.

  9. Its a function of timing, and depth of recession

    Remember, US GDP is supposed to measure Domestic Production
    We went into recession first, and our consumption has fallen faster and harder then theirs have.

    It is simply weird — Our consumption falls, as does theirs, at all slower rate

    How does that contribute to our GDP ?
    It doesn’t — its a GDP calc quirk

  10. sbailey says:

    A different way to conceptualize the C + I + G + X – M calculation of GDP: we’re trying to determine the value of goods and services produced in the U.S. by looking at who bought our stuff. That can be determined by total consumer purchases less imports of consumer goods and services, total capital goods purchased less imports of capital goods, total government purchases less government purchases of imported goods and services, and total exports. The imports subtracted out include consumer purchases, as well as imported capital goods and anything the government buys from overseas.

    It’s an indirect calculation of what businesses are producing.

  11. Onlooker from Troy says:

    GDP sucks as a comprehensive measure of our economy’s health. But that’s the way it’s used, predominantly.

  12. sinomania says:

    @call me ahab

    The USA is not even China’s largest export market – the EU is with emerging markets such as Brazil and mid-East not far behind.

    Morgan Stanley, the World Bank and others have all upgraded their forecasts for growth in the Chinese economy to 9% for 2009. DOMESTIC CONSUMPTION in China rose – in real terms – over 17% for June ’09 and is holding steady.

  13. Mauer says:

    By the way, in regard to your original post, the report also shows 1st qtr revised down; and 2nd qtr hrs worked down at 7% annual pace so very likely the negative 1% will be later revised to a much bigger negative
    also Q1 personal income fell at 8% pace.

    Consumption won’t hold up in the absence of further gov’t fiscal stimulus. .

  14. franklin411 says:

    Thankfully, we didn’t listen to that dimwit Feldstein. He wanted a massive $700 billion stimulus plan that would have been entirely spent by now, and he wanted it used to buy bombs, tanks, dreadnoughts, and pikes for the army. What a moron.

    Instead, we listened to President Obama, and something like 80 or 90% of the stimulus remains to be spent. Thanks to the President, the stimulus will kick in as the driver of growth at the critical moment when the economy has bottomed. We’re buying low, and we can expect to sell high, reaping a healthy gain on our capital invested.

  15. alfred e says:

    @franklin: Finally I get to take a shot. The velocity of money is way too low for the stimulus to make much of a difference. Money goes in peoples pockets, fat cats, not circulation.

    Besides most of it is going to keep bureaucracies alive, not infrastructure, or your beloved research and education.

    Pls. Give it a rest.

    Are you an Undercover White House internet robot?

  16. call me ahab says:

    alfred e-

    franklin is a rube


    last I checked the EU is not a country- we are still the largest destination for Chinese goods

  17. DL says:

    franklin411 @ 1:37

    “…the stimulus will kick in as the driver of growth at the critical moment when the economy has bottomed”.

    More like:

    The stimulus will kick in, in time to create the illusion of prosperity for a period of 12-18 months prior to the next presidential election.

  18. GreatWarrior says:

    Barry, Help!

    You guys at Fusion is the most accurate stock trading group. I know you guys called the bottom in March 2009.

    But are you seeing the end of rally here, or is there further to go?


  19. rootless_cosmopolitan says:


    “We’re buying low, and we can expect to sell high, reaping a healthy gain on our capital invested.”

    What is this supposed to mean? What are you buying low you expect to sell high? Are you a surviving mercantilist? I thought this species of economic thinking has been extinct for more than 200 years.



  20. rootless_cosmopolitan says:


    BTW: Who is supposed to be “we” in your statement?


  21. VennData says:

    The Austrian School of economics would say that you don’t know if GDP is wealth expansion or capital consumption. Yet the Supply Siders say economic incentives must be used to drive growth, an interesting difference since you don’t know what’s going to end up being produced according to the Austrians. The Austrians and Supply Siders should sit down and have a beer.

    And where are the Supply Siders who should be hailing the “Cash for Clunkers?” Maybe if they called it “Marginal Rate cuts for Motown” they’d be cheering.

  22. HCF says:


    >The stimulus will kick in, in time to create the illusion of prosperity for a period of 12-18 months prior to the next presidential election.

    So true, my friend, so true! =)


  23. rootless_cosmopolitan says:

    What’s with all the negativity here? You have to have confidence. Confidence is the key to economic prosperity. If you don’t believe, particularly in the authorities to do everything right, nothing will become better.


  24. willid3 says:

    i think i have figured out why GDP hasn’t fallen a lot more considering how high unemployment is. Its because 70% of total income in the US is earned by the top 1 percentile. if there were layoff in that group, then GDP would be in a big world of hurt. the draw back is of course, that if we get to higher unemployment, there will be a lot of unrest among the sheep. which could end that domination by that particular group, but create a new group doing the same thing!

  25. rootless_cosmopolitan says:


    “i think i have figured out why GDP hasn’t fallen a lot more considering how high unemployment is. Its because 70% of total income in the US is earned by the top 1 percentile. if there were layoff in that group, then GDP would be in a big world of hurt. ”

    I haven’t checked the correctness of the number, but whatever the number is, let’s assume 70%, the income of this top 1 percentile isn’t generated by this percentile. The income is surplus value generated by someone else. And who would layoff this top 1 percentile? They themselves?


  26. cvienne says:


    BR I basically zeroed in on this number about 10 minutes after the report was published and made this comment in another thread…(which is the SAME observation)…


    But nobody really listens to me around here because I’m the class clown (who is – also challenged today due to “power outage” problems in the area)…

  27. matt says:

    @ahab ” well it would appear that the consumer has cut down signigicantly on “Made in China””

    That’s not what Michael Pettis has shown:

    Chinese proportion of non-oil US deficit

    Year Share
    2000 26%
    2001 27%
    2002 28%
    2003 31%
    2004 35%
    2005 40%
    2006 45%
    2007 54%
    2008 69%
    2009 83%

    Doesn’t look like a cut down on Made in China to me. It looks more like downgrading to cheaper items (i.e., shifting away from other exporters). I think there were a lot of stories about “slumming it” lat year.

  28. matt says:

    @f411″Thanks to the President, the stimulus will kick in as the driver of growth at the critical moment when the economy has bottomed.”

    Yeah, because that’s the exact time you want a stimulus to kick in — after it’s already over *rolls eyes*

    Did you completely miss the past 7 years? Having a bunch of stimulus kick in after the bottom is just another way to blow a bubble. This is one reason why stimulus programs are a terrible idea – in order for them to take effect in time, you have to implement them well before the recession starts. Since our leadership can’t even see a housing bubble the size of a large star, it’s unlikely that anyone will ever produce a timely stimulus. They will, however, produce an UNtimely bubble.

  29. jc says:

    The US consumer led the charge downward when he lost access to his home ATM and that takes a big whack out of discretionary spending – Asian electronics & autos. Asia and Europe have followed US down. What do we export to them? Software, services (think IBM) and planes, maybe not so easy for them to turn off the import spigot as US consumers.

  30. Groty says:

    In spite of REAL fiscal stimulus in the form of extra social security checks going out and cuts in payroll taxes, PCE was still down 1.2%. That’s good?

    But with federal spending up 11%, at least now we can see that part of the $787 billion the 536 central planners in Washington borrowed to waste on things like studying why pig shit stinks and building a tunnel for turtles to cross the road is, finally, being wasted as intended. Just in time to create a brand spanking new entitlement program.

    The other two entitlement programs have worked out so well, currently underfunded by only $107 trillion, why not?


  31. [...] Update from Ritholtz: Adjusted for Import/Export stat weirdness, Real GDP was -2.38. [...]

  32. [...] that added to U.S. GDP, even though that’s not encouraging for America or its trade partners. Barry Ritholtz calculates that, without the “boost” provided by the import/export difference, “GDP would [...]

  33. [...] with enough caveats to choke a horse. For one thing, one big reason for the improvement was that imports fell as twice as fast as exports, which actually ends up boosting GDP (it is gross domestic [...]

  34. [...] for those foreign-trade figures, Barry Ritholtz of the Big Picture draws attention to how they twist the overall figures: In an odd twist, with US consumers are weaker than their Asian and European counterparts, it turns [...]

  35. Mike in Nola says:


    %age from China may be bigger, but total deficit is smaller. Down to $26B in May from $39B in Dec. from $57B.

    Depends on the mix.


    Europeans are much more protectionist that we are and are in just as bad a shape, just not there yet.. If you think they will bail you out, forget it.

    As to the believablility of the Chinese numbers, I thought Marc Faber’s remark about the Chinese GDP (link posted earlier today on another thread) was good. Something to the effect that China has the only government that knows its GDP numbers two years in advance.

  36. Mike in Nola says:


    Meant $57B in Dec. 2007.

  37. Froglips says:

    @Mike on St Charles :)

    Europe except England and to a lesser extend, Spain, Italy and Greece is in way better shape that the US. Yes the paper mills and presses are running but not even close to the US amount. For the case of France, the real estate bubble of the last 10 years has not yet burst and will definitively burst. However, on paper the French population has 11 Trillions in the bank if I recall properly and the national deficit will be around 1.5 Trillions by the end of the year. The question is, is that money in French banks or has it been lent to US consumers…
    Germany, Holland, Denmark, Sweden, Norway, Austria for them most part are financially sound. Poland and some of the other eastern countries are looking better by the day.

    Big time crisis is coming to Europe and he biggest problem with western Europe is IMHO it has it’s head glued toward the US and has blindly copied and listened to the US for years. This downturn is/should awaken the somewhat healthier Europeans nations into the opportunities that lay right around them.

    Eastern Europe has a lot of potential and so does Russia and some of it’s former satellites and so does Africa. To the US dismay Russia holds a lot of near term opportunities for western Europe (EU).

    France as well as other nations has major immigration issues to deal with, it will be painful but it is almost unavoidable with massive scale migrant returns. As a result, if this crisis blows up “big time” a cultural civil war on the lines Muslims Vs others (immigrants Vs natives) might put itself on the agenda. Sad to say, minorities have a tactical disadvantage as they are mostly housed in concentrated building projects which wont leave them with many choices.

    In any case, Europe has avenues out of this mess the US does not have, in particular Russia who is let’s not forget geographically part of Europe and to a lesser extend Africa.
    Italy and Greece might fall out of the Euro zone or might at least talk the walk and ride the fence. What to do with England might become the a thorny issue. The smart thing to do would be to let England on their knees beg for forgiveness and bring it back into Europe. If they still want to play cocky, just feed the humanitarian aid.

    I truly believe that Europe has the chance of the century to clean up it’s act and be a great leader into the 21 one.
    All in all, my bet is against the house 3 to 1

  38. hr says:


    Please explain how GE (a pretty diversified company, finance and manufacturing, etc.) reports a REVENUE decline of 17%, yet US GDP only falls 1% ?

    There are lots of other companies falling 20-30% in revenue. Who is gaining so much for the GDP to be only down 1% ?

  39. alfred e says:

    @hr: Good question. My guess is those two industry reforming our economic backbone: financials and health care. Man, they’re creating billionaires by the bushel. Oh, GE is a financial. But GS more than made up for the rest. ANd will continue to do so until there are two banks left: GS and JPM.

  40. Doc at the Radar Station says:

    This is an end result of this decades long dynamic:

  41. the bankster says:

    This same accounting added 2.6% to 1Q GDP. Globally, this is zero sum game, as trade surplus countries “lose” this GDP, and will even out over time. The world economy is going through a rare phase change, lurching toward what some call the “New Normal.” Until then, best to avoid relying on old rules of thumb for judging the economy, such as this “addition” to GDP. Plunging trade data just below the surface tells us much more than this morning’s -1% GDP headline.

  42. cvienne says:



    Nevermind…please don’t answer…

  43. call me ahab says:


    watch your syntax my friend-

    “In any case, Europe has avenues out of this mess the US does not have, in particular Russia who is let’s not forget geographically part of Europe and to a lesser extend Africa.”

    sounds like you are saying Russia is part of Africa-

    after I read it a time or two- i understood your point-

    as you say- the world is being shook up a bit- will be interesting to see how it plays out- the US model has clearly seen better days

  44. beaufou says:

    @ franklin411

    You got a free beer to say this?
    Seriously, you haven’t noticed that we are bankrupt living on borrowed Chinese time.
    Our President?
    You mean, the guy who can’t even get his own corrupt majority to vote for a bogus, do nothing Healthcare bill?

    Buying low, yeah right, all those derivatives our national debt bought are real good, selling real high…

  45. Simon says:

    The maths make sense to me. If GDP is a measure of domestic production and although both imports and exports are falling only exports less so that means the gap was made up from Domestic Production hence it is a positive contributor. But only if the gap was consumed and not saved and there in lies the rub. There is probably some way to check if the gap was saved or consumed but it would probably be wrong.

  46. Mike in Nola says:


    I dunno. Thinks look pretty bleak in Germany.

  47. Bob_in_MA says:

    It’s amazing that someone who has trouble understanding simple equations gets so much attention.

    Barry i’s an example of someone who becomes a pundit by shear force of ego, and a love of attention.

  48. olephart says:

    The Curmudgeon Says:
    July 31st, 2009 at 12:12 pm

    “is the owner’s equivalent rent, the imputation of rent that an owner would pay were he renting his house but that he’s not paying since he owns the house.”

    To test this rationale, try paying your income tax with this imputed income and see if the IRS agrees with this concept.

  49. sailorman says:

    It’s not an oddity. This is the formula: GDP = private consumption + gross investment + government spending + (exports − imports)

    The formula is measuring production within the US. If you start with consumption, you have to subtract the component of consumption produced somewhere else. By the same token, you have to add exports, since that captures production that is not part of domestic consumption, but produced domestically. How else could you arrive at the production number?

    Since home purchases are part of the investment number, the real oddity is that a huge part of GDP was removed (home purchases) and replaced with government spending. What does that mean for the long run?

  50. [...] A look at imports and exports suggests GDP not as good as it [...]

  51. sailorman says:

    Here are some of the 2ndQ/1st Q comparison numbers direct from the government (BEA):.
    Real federal government consumption expenditures and gross investment increased 10.9 percent
    in the second quarter, in contrast to a decrease of 4.3 percent in the first. National defense increased
    13.3 percent, in contrast to a decrease of 5.1 percent. Nondefense increased 6.0 percent, in contrast to a decrease of 2.5 percent. Real state and local government consumption expenditures and gross
    investment increased 2.4 percent, in contrast to a decrease of 1.5 percent.

    Real personal consumption expenditures decreased 1.2 percent in the second quarter, in contrast
    to an increase of 0.6 percent in the first. Durable goods decreased 7.1 percent, in contrast to an increase
    of 3.9 percent. Nondurable goods decreased 2.5 percent, in contrast to an increase of 1.9 percent.
    Services increased 0.1 percent, in contrast to a decrease of 0.3 percent.

    Real nonresidential fixed investment decreased 8.9 percent in the second quarter, compared with
    a decrease of 39.2 percent in the first. Nonresidential structures decreased 8.9 percent, compared with a decrease of 43.6 percent. Equipment and software decreased 9.0 percent, compared with a decrease of 36.4 percent. Real residential fixed investment decreased 29.3 percent, compared with a decrease of
    38.2 percent.

    Clearly government spending prevented the GDP numbers from scaring the shit out of everyone. Does anyone in their right mind think this is good news! Only TV financial analysts and most news outlets can spin this as positive. If the comparison was 1st half of 2009 compared to 1st half of 2008 without government stimulus, the decrease would be staggering.

  52. [...] Falling Imports versus falling Exports (Ritholtz) [...]