The dramatic news this morning from the BEA on Gross Domestic Product showed economic growth slowing to 1.6%
The deceleration in real GDP growth in the third quarter primarily reflected an acceleration in imports, a downturn in private inventory investment, a larger decrease in residential fixed investment, and decelerations in PCE for services and in state and local government spending that were partly offset by upturns in PCE for durable goods, in equipment and software, and in federal government spending.
One of the negative factors in growth was exports of services. While services export in current dollars increased (as is reflected in my monthly analysis of the trade in intangibles), exports in constant (inflation adjusted) dollars actually decreased by 1.4% in the third quarter. Ominously, this was not due to a surge in inflation – as the price index increase for services exports was actually smaller in the third quarter than in the second.
This worrisome trend will need to be watched carefully.