As trade kept the US economy afloat amid rising unemployment, a deep housing crisis and turmoil on Wall Street this year, much attention has been paid to America's booming exports.
Both in agriculture and some areas of manufacturing, US producers of goods have benefited from strong growth overseas – which has boosted international demand – along with the weak dollar, which has made US producers more competitive on price.
But surging exports are only half the story. Just as importantly, if not more, America's import economy has been losing steam, as US consumers are retrenching during the downturn and shifting away from imported goods that have become more expensive – another effect of the weak dollar.
Excluding imports of foreign oil, nominal demand for international goods and services fell 1.6 per cent in June, while real goods imports fell on a year-on-year basis in the second quarter by 2.3 per cent.
"The slowdown in imports has been pretty broad-based and has been continuing for some time," says Abiel Reinhart, a US economic researcher at JPMorgan in New York.
Stunned economists were forced to boost their calculations of trade's contribution to US gross domestic product earlier this month after surprisingly strong trade data showed nominal US exports grew twice as fast as imports in June, narrowing the trade deficit by 4.1 per cent to $56.8bn (£31.1bn, €38.7bn).
When the government updates its estimate of economic growth for the second quarter today, the figure is expected to be much higher than the 1.9 per cent annualised rate reported at the end of July before the most recent trade data. Consensus yesterday morning among economists was of a 0.8 percentage point gain leading to annualised GDP growth of 2.7 per cent, with some even expecting it to reach as high as 3 per cent.
Nowhere is the change more apparent than in the Port of Long Beach in southern California, just south of Los Angeles – the largest in the US and an important shipping gateway to Asia.
Between January and July, loaded inbound containers were down 12.7 per cent compared with the same period last year, amid declines in import volumes for a whole variety of goods, including items such as furniture and bedding and ceramic products. Many of these products serve the housing industry, whose bust has been particularly painful in areas close to Long Beach as well as in nearby states such as Arizona and Nevada. Meanwhile, loaded outbound containers surged 23.2 per cent on a year-on-year basis, reflecting surging exports.
"Import volumes at the Port of Long Beach give us an early warning of what's in store for the economy – in down times, it's like the canary in the coal mine," James Hankla, president of the Port of Long Beach Harbor Commission, told the FT.
"The import declines of the past 14 or 15 months have told us that US importers haven't been banking on an economic rebound. We don't expect much of a change in that through the rest of 2008, but by 2009, hopefully, we'll start seeing the signs of a turnaround," Mr Hankla added.
David Rosenberg, an economist at Merrill Lynch, said just before the June trade data was released that declining imports alone contributed 1.3 percentage points to US growth in the second quarter, compared with 1.2 percentage points for rising exports – the first time in five years that falling imports played a bigger role than exports in propping up GDP.
"When you talk about net exports or the foreign trade sector to clients, they automatically think you're talking about what we ship to overseas markets, and there is no doubt that booming exports have been a major source of support for the economy," Mr Rosenberg. "However, what isn't well known is that we just reached a point where the import part of the story is starting to dominate."
Recent trends may mean the peak in the impact of stuttering imports on the US economy has passed, however. The recent rally in the dollar as global growth slows may make foreign imports more competitive in terms of price, preventing a shift in consumer habits towards American products.
Meanwhile, any signs that the US could emerge out of the global economic downturn ahead of other parts of the world would also lead to a rebound in imports.
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