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Trade balance

Exports minus imports of goods and services; net exports enter GDP directly, so a widening deficit subtracts from measured growth.

The accounting is often misread. Imports are subtracted in the GDP identity only because they were already counted in consumption and investment, not because buying foreign goods makes a country poorer. A surge in imports usually reflects strong domestic demand.

The trade balance is also the largest guesswork item in the advance gdp-vintages estimate, so the monthly trade report released a few days before can shift GDP nowcasts by several tenths of a percentage point.

Example: the goods and services deficit widens from $68 billion to $78 billion in a month. Annualised, that $10 billion swing is roughly $120 billion against a $29 trillion economy, trimming about 0.4 points from the quarterly growth estimate.

Related: current-account, gdp, gdp-vintages, nowcasting, real-gdp

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