Port strikes and the strengthening dollar tanked GDP

Port workers strikeDavid McNew/GettyMembers of International Longshore and Warehouse Union Local 63 Office Clerical Unit walk a picket line near APM Terminals, halting cargo at the busiest seaport complex in the nation on November 29, 2012 in Long Beach, California. The strike is the largest work stoppage at the ports of Los Angeles and Long Beach since a lockout by shipping companies in 2002, which prompted President George W. Bush to intervene with a court injunction to resolve the standoff.

First quarter GDP was a big miss.

The BEA reports that the US’s gross domestic product grew by only 0.2% in the first three months of 2015. Economists had estimated 1% growth.

A big part of the low growth may have been the port slowdowns and strikes in Southern California earlier this year. Deutsche Bank’s Joe LaVorgna predicted back in February that the port strikes could reduce Q1 GDP by up to 1 percentage point.

Couple that with the strengthening dollar, and you’ve got a recipe for a bad quarter.

As predicted, net goods imports were not great this quarter, and net goods exports were downright horrible.

In a note to clients, Capital Economics writes:

Net exports were also a big drag on growth, subtracting 1.3% points, as exports fell by 7.2%, while imports increased by 1.8%. The dollar’s recent appreciation means that net exports will remain a drag on GDP growth for the rest of this year, but it will be a lot smaller than it was in the first quarter.

Here’s an excerpt from the BEA’s table on how each sector of the economy contributed to the GDP numbers:

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