March 26, 2020
It is important to remember that final sales is a measure of how many domestically produced goods are sold each quarter. But we also sell goods overseas — our exports. And we purchase goods from other countries — our imports.
In the never-ending process of analyzing the GDP data, there is yet another series called “final sales to domestic purchasers” which measures how much U.S. residents are actually spending. It starts with final sales, but then subtracts exports (which represents how much foreigners are buying from the U.S.) and adds imports (which represents how much U.S. residents are spending on imports). The end result is a measure of sales by domestic purchasers.
Final sales to domestic purchasers rose 1.6% in the fourth quarter after having risen 2.2% in the third quarter. In the fourth quart6% while final sales rose 3.1%, it is clear that the trade component added 1.5% to GDP growth in that quarter. Over the past year this series has risen at a 2.3% pace
But all of this changed beginning in March of this year as the government’s response to the corona virus has stopped the economy dead in its tracks. For what it is worth, we currently expect Q2 GDP to decline 20.0%, and to fall 1.0% for the year.