Michigan ranks second in export growth in May
Foreign demand for made-in-USA goods has significantly contributed to Michigan's economic recovery by cushioning the weakness in domestic demand that is a result of financial turmoil, collapsing housing markets and double-digit unemployment rates.
In the latest quarterly report of U.S. GDP, the contribution of exports accounted for one half of the growth in the U.S. economy, which grew at an annual rate of 2.7 percent from the last quarter of 2009.
In other words, if U.S. export growth had been nil, the national economy would have registered a growth rate of just 1.3 percent in the first quarter of 2010, with severe effects on jobs and economic development.
In its July update of the 2010 World Economic Outlook, the International Monetary Fund assessed a strengthening in global economic growth in the spring of 2010, despite renewed financial turbulence. According to the report, “the world economy expanded at an annualized rate of over 5 percent during the first quarter of 2010. This was better than expected in the April 2010 WEO, mostly due to robust growth in Asia.”
Using the recently released international trade statistics, exports of goods for the country as a whole rose by 2.8 percent in May to a 20-month high of $107.2 billion, adjusted for seasonal variation. So far this year, national exports of goods grew by an impressive annual rate of 22.4 percent from the same period a year ago.
How does Michigan match up to the other states in export growth in 2010? In the first five months of the year, foreign sales from Michigan companies, seasonally adjusted, increased by an annual rate of 56.9 percent compared with the first five months in 2009.
In view of the foreign sales record of state exporters in 2010, Michigan ranked second among the 50 states in export growth.
Looking at the latest state snapshot of international trade numbers, foreign sales of goods made in Michigan were nearly flat, edging up in May by 0.1 percent, after a decrease of 4.6 percent in April. Michigan's exporting companies sold $3,728.5 million in goods overseas in May, adjusted for seasonal variation.
Compared with a year ago, Michigan's exporting companies this May surpassed their export performance in May 2009 by $1,396.1 million, or 59.9 percent.
Michigan's foreign sales in May reflected the mix of trends in foreigners’ demands for goods made by different industries. Overseas shipments from Michigan manufacturers, which accounted for 86 percent of all exports, decreased to $3,218.4 million, seasonally adjusted — 1.8 percent less than April’s level of factory shipments.
Exports of non-manufactured goods went up 13.7 percent in May to $510.1 million, adjusted for seasonal variation. This group of foreign sales consists of agricultural goods, mining products and re-exports, which are foreign goods that entered the state as imports and are exported in substantially the same condition as when imported.
What are the prospects for growth in the world economy that would drive demand for goods made in Michigan during the rest of 2010 and in 2011?
IMF’s latest outlook predicts economic growth in the industrial countries to register 2.6 percent in 2010, weaker than the April 2010 projection of 2.9 percent. In 2011, it is expected to slow to an annual rate of 2.4 percent.
The Washington, D.C.-based international organization forecasts economic growth for developing countries — the group includes China, India and Brazil — to hit 6.8 percent in 2010 and 6.4 percent in 2011.
Important for Michigan's exporting companies, the IMF forecasts the volume of global trade to grow 9 percent in 2010 and then slow to 6.3 percent in 2011, compared with an increase of 11 percent in 2009.
IMF’s outlook predicts worldwide imports of the industrial countries to advance by 7.2 percent in 2010. However, worldwide imports of the developing countries are forecast to jump by 12.5 percent in 2010. Consequently, driven by developing countries’ demand, Michigan's exports are a key contributor to local production and jobs; thus, it is expected to keep the state economy from sinking again into a new recession.
Evangelos Simos is chief economist of the consulting and research firm e-forecasting.com. He may be reached at email@example.com