EconSouth (Fourth Quarter 2008)

For the past two years, international trade has been a key driver of U.S. economic growth. The U.S. economy barely expanded during 2008, but without overseas trade, gross domestic product (GDP) would have declined during the same period. Demand for U.S.-made goods from major trading partners such as Canada and the European Union primarily drove the increase. In addition, the weak U.S. dollar, which started depreciating in 2002, made U.S. companies more competitive abroad.

While exports increased at a fast pace, imports slowed. The United States began to buy fewer imported goods as their prices increased because of the weaker dollar. Consumers opted for relatively cheaper U.S.-made goods, boosting the domestic manufacturing industry.

Ports see more traffic in 2008
The value of international shipments passing through Southeastern ports in 2008 exceeded 2007 levels. The expansion of trade with Asia and foreign manufacturing investments in the region led East Coast ports such as those in Savannah, Ga., and Jacksonville, Fla., to improve their container facilities. The American Association of Port Authorities recently ranked the Port of Savannah as the nation's fastest-growing container port, and JacksonvilleÑwith Japanese and Korean shipping companies adding container terminalsÑcould see tripled container capacity by 2011.

Gulf Coast ports in the region are not far behind this rate of growth. The Port of Mobile is adding container capacity to accommodate increased shipments generated by the new $4.2 billion ThyssenKrupp steel processing plant, which will begin production in Mobile, Ala., in 2010. The port's container traffic has also benefited in recent years from increased rail-to-barge trade with ports in the Gulf of Mexico.

Robust global demand propels ports
For the year ending in August, exports rose more than 28 percent regionally, with all regional ports posting double-digit gains, according to U.S. Department of Commerce data. Exports from the Southeast benefited from Canada and Mexico's strong demand, and increased orders from Brazil, the United Kingdom, Germany, and China also boosted Southeastern exports.

For the same period, the value of imports into the region rose nearly 18 percent, an increase mostly driven by higher import prices, especially for commodities. Although import values across regional ports rose, import volumes fell from year-earlier levels.

Looking ahead to 2009
In the near term, U.S. exports should grow at a much slower pace primarily because the dollar strengthened significantly during the third quarter of 2008 against the currencies of major trading partners, making domestically produced goods more expensive for overseas markets. Also, as global economic growth has slowed, foreign demand for U.S.-made goods weakened. Overall, diminishing international trade could prove a drag on U.S. GDP growth starting in the second half of 2009.

Andrew Flowers, Laurel Graefe, Julie Hotchkiss, Whitney Mancuso, Kate Rees, Navnita Sarma, Menbere Shiferaw, and Gustavo Uceda of the Atlanta Fed's research department and Brian Bowling and Carl Hudson of the Atlanta Fed's supervision and regulation department contributed to this article.