GDP Falls Back Into Rut as Soybean Surge Unwinds
Live by the bean, die by the bean.Last quarter:
When the U.S. gross domestic product spiked up in last year’s third quarter, a lot of folks quickly noticed one outlier that had skewed the results: a surge in soybean exports. Driven by record harvests and surging demand from China, soybean exports on their own added about 1% to GDP growth. This was either not recognized by most observers, or dismissed. The meme was that the economy was picking up speed, and good times were returning,
They’re paying attention this morning. Fourth-quarter GDP fell back into its familiar rut, rising only 1.9%, below even the modest Street expectations of 2.2%. For the full year, GDP grew only 1.6%, down from the 2.6% growth rate recorded in 2015. At the time of the third-quarter GDP report, we said that excluding the soybean spike, the long-term growth rate was still around 1.5%. This morning’s report bears that out.
The big drag in the fourth-quarter report was overall trade, which fell 1.7%. That was the biggest slide since 2010, but it was mainly driven by the reversal of the soybean surge. Exports fell by 4.3%, offsetting the 10% jump in the third quarter, and imports rose by 8.3%. Exports add to GDP growth, imports subtract from it. Less of the former and more of the latter will result in a weak growth number.
“The partial reversal of onetime gains in trade underscored a modest 1.9 percent pace of growth in the final three months of 2016 that is modestly above our estimate of long-term growth of 1.5 percent,” said RSM U.S. Chief Economist Joseph Brusuelas in the wake of Friday’s report.
It’s not that the third-quarter bounty for Iowa soybean farmers wasn’t welcome or a good thing. It’s just that it’s not a broad growth driver. Flip your attention to another economic report this morning, the report for December durable-goods orders, and you see that one key driver is still lacking. The real takeaway from this report, is the read into one important factor that could be an economic driver: business spending....MORE
"Economists React to Third-Quarter GDP: ‘The U.S. Is Roughly on Track’"
...“We reckon the leap in [soy]bean exports contributed 0.9 percentage points to growth….In short, the headline GDP number looks good but the soybean export surge will reverse in [the fourth quarter], and that’s a significant headwind. Even with decent consumption, a further rise in capex and a clear rebound in state and local government consumption, our starting assumption for the quarter is GDP growth of 2%. But the headline today will increase expectations for a December rate hike a bit further; we think the Fed will act.” —Ian Shepherdson, Pantheon Macroeconomics...MORENow there's a guy who digs into the details.
Trade and Other Stuff: "The (No Longer) Almighty Soybean"
Consider the humble soybean...*
From the Council on Foreign Relations' Follow the Money blog, Dec. 7:
The U.S. trade deficit rose in October.
One reason (no surprise): Soybeans. Seasonally adjusted, monthly soybean exports are now $3 billion off their July and August peak. Actual soybean exports—in billions of dollars—rose in October. As they should. Soybeans have real seasonality: U.S. exports peak after the harvest. The seasonal adjustment seeks to smooth out this natural month-to-month volatility.
The good news from the summer is now mostly behind us. Still, as a result of the out of season exports—and higher prices—the U.S. has already exported $7.5 billion more soybeans this year than last....