imports

According to the New York Times the Commerce Department’s monthly report on trade showed a 1.7 percent increase in imports. Exports barely rose, however they are at a high enough level to have caused the trade deficit to rise to 7.4 percent, despite the increase in imports. Much of the growth in imports came from consumer goods, this is seen by some analysts as a positive thing as it signals a rise in consumer spending. However it is important to note that this consumer spending is not backed by the creation of any goods within the U.S. economy this is why imports are subtracted from GDP numbers. While a rise in consumer spending may signal a rise in economic activity it is only helpful if it is backed by a rise in production, otherwise it becomes a drain on the economy as it subtracts from overall GDP figures; The fact that many analysts ignore this fact and continually focus on spending as the prime indicator of economic growth highlights the shortfalls of demand side economics. What most of these people do not realize is that supply is what creates demand and therefore drives our economy. If an individual wishes to purchase items by acquiring money that individual must first produce something that others will want to buy. If spending is not backed by production it signals a rise in debt levels and no real rise in economic performance.