by Jun Nie and Lisa Taylor – Macroeconomic research from THE FEDERAL RESERVE BANK OF KANSAS CITY
U.S. export growth, which relies primarily on foreign demand, has played as important role in the U.S. economic recovery. When foreign growth increases, foreign demand strengthens, boosting the growth of U.S. exports and raising their contribution to U.S. GDP. Some regions growth rates, however, have greater impact than others on U.S. exports.
Economic growth is generally expected to pick up in many regions across the world in 2014. With the improving outlook, U.S exports are likely to contribute positively to U.S. real GDP growth in the year ahead. However, recent downwards revisions to some commonly- followed projections for world growth, such as those produced by the International Monetary Fund, Prompt questions about the size of the contribution. Using statistical methods to analyze historical data, we update our previous analysis to assess how revisions to the world growth projections may affect the outlook for U.S. exports.
Although U.S. growth is expected to improve next year, the downward revisions in overseas growth forecasts may be associated, based on our analysis, with a 0.2 percentage-point reeducation in the year-over-year U.S. growth rate in 2014, due to a smaller contribution from exports than had been previously expected. For example, suppose real exports were previously forecast to contribute 0.7 percentage point to U.S. growth in 2014, matching their average annual contribution over the past two years. Based on the recent downward revisions to world growth forecasts, their contribution would now be reduced to 0.5 percentage point. Effectively, the contribution from exports to real GDP growth, though still projected to increase next year compared with this year, is likely to increase less than was previously anticipated.
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U.S Exports and Foreign Economic Growth
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source: http://www.kansascityfed.org/publicat/research/macrobulletins/mb13Nie-Taylor1105.pdf
