Courtesy of Mish.
The Wall Street Journal had an amusing article a few days ago in which analysts bumped up GDP forecasts for numerous reasons including inventories, exports in general, and soybeans in particular. Let’s investigate the claims.
Please consider Soybeans Are Fueling U.S. Economic Growth (But Not for Long).
U.S. agricultural exports have surged the past two months, helping cut the trade deficit and boosting the outlook for short-term economic growth.
One big factor? Soybeans. Bumper harvests at home, crop shortfalls in South America and solid demand—especially from China—have propelled international feed sales.
“Soybean exports will add about 1% to [third-quarter] GDP growth,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note to clients.
Mr. Shepherdson is forecasting 4% annualized growth in third-quarter gross domestic product, a broad measure of economic output.
That’s a big improvement from 1.4% GDP growth in the second quarter and 0.8% in the first. But it does little to alter the longer-term outlook. First, exports are likely to return to trend while depleted crop inventories would be a drag on GDP. Second, the economy has averaged a modest 2.1% growth rate over the course of the expansion, a trajectory that seems unlikely to change despite some noise from quarter to quarter.
“The soybean boost is indeed a one-time thing. It has no implications for trend growth and likely will reverse over the next couple quarters,” Mr. Shepherdson said.
Shifting Outlook
Following the commerce department international trade report on September 29, other analysts bumped up their forecasts as well.
- J.P. Morgan Chase revised its outlook to 3% annualized growth in the third quarter, up from its earlier estimate of 2%.
- Amherst Pierpont Securities boosted its forecast to 3.7% from 3.5%.
- Macroeconomic Advisers raised its tracking forecast by three-tenths to 3.1%.
- Barclays inched up to 2.6% from 2.4%.
Is JPMorgan reading Shepherdson? The other way around?
Regardless, Shepherdson’s forecast got me curious about a number of things, namely soybeans and the trade deficit.
Trade Deficit Shrinks More Than Exected
