The real trade deficit has been contracting so far this year and accounted for a major portion of growth this year. Just another example of how in the new world the US exports recessions.
But this quarter this is changing. We now have Oct and Nov real trade data that will enter into the first estimate of fourth quarter real GDP growth. As the chart abve shows, in the first three quarters of the year the trade deficit improve, adding to growth. But over the last two months the real trade balance has collapsed. The peak in the chart is the last month of the third quarter. Consequently, trade will be a major negative for the real gdp report when it is released in sharp contrast to earlier this year when it was a surprisingly strong positive. In the chart the recent peak is the end of the third quarter and the real GDP report will be based on the change from that peak to the most recent observation.
But this does not change the basic trend that imports are contracting faster than exports are expanding. But it has a major impact on China, India and other LDC.s where exports to the US are a major source of growth– accounting for roughly half of growth in China . Contracting US imports are a major deflationary impact for the world economy that few economic models adequately account for.