Trade deficit up in the first quarter of 2008 despite the falling dollar

The preliminary estimates for the overall US economy during the first quarter of 2008 are pretty dismal. Real GDP was up at a paltry annual rate of just 0.6% in the quarter for the second quarter in a row. The following graph shows the trend since the first quarter of 2000:


Gross fixed investment fell for the 8th quarter in a row, reflecting the continuing stagnation in business investment and the continuing decline in new residential construction:


Despite the falling dollar, the trade deficit turned upward for the second quarter in a row. It was 4.97% of GDP in the third quarter of 2007, 5.04% in the fourth quarter of 2007, and 5.20% during the first quarter of 2008 as shown in the graph below:


Some economists think that the falling dollar will correct the trade deficits. This is unlikely to happen so long as more and more countries pursue the mercantilist strategy of selling to the United States without buying from the United States.

Howard