An exceptional decline in imports to the United States helped keep GDP growth north of 1% in the fourth quarter of last year.
Gross domestic product, the sum of all goods and services produced in the U.S., is fueled by household consumption, business investment, government spending and net exports, or the difference between exports and imports.
The percent decline in imports to the U.S. totaled a whopping 8.7%, the single largest quarterly decline in the value of goods and services purchased from foreigners in over 10 years.
That decline in imports, in turn, had an outsized impact on how the broader net exports segment contributed to the headline GDP number in the fourth quarter. Net exports accounted for a positive 1.48 percentage points of the 2.1% GDP gain, its largest contribution to quarterly GDP growth since 2009.
In fact, of that 1.48 percentage-point net export contribution to real GDP growth, 1.32 percentage points came exclusive from the decline in imports with the remaining 0.17 percentage points coming from a bump in U.S. exports.
All else equal, had net exports in the fourth quarter contributed to the headline GDP number to the same extent they did in the third quarter, overall GDP growth for the last quarter of 2019 would have been 0.45%.
"Economic growth, though healthy, continued to slow in 2019," wrote Sung Won Sohn, a business economist at Loyola Marymount University. Sohn added that while he thought the headline GDP growth appeared decent at first, he was concerned about the outsized impact of falling imports, calling it "not a long-term source of economic strength."
Though imports of goods sank 11.6% between the third and fourth quarter, consumer goods minus food and automotive cratered 23.6%. Automotive vehicle imports swooned 24.8%.
One reason for the steep decline in imports could be the Trump administration's laser focus on reducing the U.S. trade deficit and emphasis on renegotiating trade deals to be more "fair and reciprocal." The priority has thrust Washington into multiple bilateral disputes with its economic partners, including China and (to a greater extent of late) the European Union.
The U.S. and China agreed to a sort-of ceasefire in the trade war at the end of the fourth quarter.
A spokesperson for the Bureau of Economic Analysis — the bureau that publishes U.S. GDP data — said that while the office isn't able to tie the decline in imports to U.S. trade policy, much of the decline came from a swoon in consumer goods.
China, one of the U.S.'s largest trading partners, could be on the receiving end of the slump in consumer goods imports. Top import categories from the China to the U.S. in 2018 were electrical machinery ($152 billion), machinery ($117 billion), furniture and bedding ($35 billion), toys and sports equipment ($27 billion), and plastics ($19 billion).
AllianceBernstein Senior Economist Eric Winograd offered similar skepticism over the sustainability of the net export contribution and thoughts on the consumption component.
"Personal consumption, fell short of expectations at 1.8% and made its smallest contribution to overall GDP growth of 2019. The largest positive contribution was from net trade, which added almost 1.5 percentage points," he wrote. "That is an unusually large figure and likely the result of decreased imports due to the trade war."
" I would not expect a repeat performance in Q1," he wrote.