But what happened last quarter, the super-spike in the trade deficit, was extra-ordinary. As supply chains improved somewhat and as businesses were able to build inventories, imports of goods surged in a historic manner, causing the brutal worsening of the trade deficit in goods.
And this brutal worsening of the trade deficit reduced GDP by $192 billion annualized. But overall GDP fell by only $70 billion! A decline of half the size, which would have still been huge, would have produced a positive GDP reading:
Spending on durable goods has fallen sharply since March 2021 (-10.7%, adjusted for inflation). But it remained very high, up 24% from March 2019, and will likely fall further, regressing toward the pre-pandemic mean, as consumers switch their spending back to services:That Q1 GDP Drop Was a Freak Event that’ll Get Unwound in Q2 | Wolf Street