Exports from Michigan dropped 6.0 percent in June
Indicators that gauge current economic conditions in industrial countries show signs of an end to a short-lived recovery boom, which followed massive government spending and low interest rates. In line with global business trends is an undergoing slowdown in the foreign demand for American goods.
In the second quarter of this year, growth in industrial countries’ Gross Domestic Product — the best measure of a county’s overall economic well-being — registered an annual rate of 2.8 percent, the same reading as in the first quarter.
Historically, when an economy enters recovery from a deep recession, GDP advances at an accelerating pace, bringing back jobs lost in the business downswing. This has not been the case in the current economic recovery in the industrial countries.
Here at home, economic growth in the second quarter decelerated to an annual rate of 2.4 percent from 3.7 percent in the first quarter and 5 percent in the last quarter of 2009. Foreign demand played an important role in the loss of pace of the U.S. economic rebound, resulting in more job losses like those experienced during the major downturn.
According to the Department of Commerce, which tracks our national accounts, the contribution of merchandise exports to the growth of our GDP declined in the first half of this year from the last quarter of 2009. Growth in goods and services bought by consumers and businesses from around the world registered an annual rate of 10.3 percent in the latest quarter from 11.4 percent in the first quarter and an astounding 24.4 percent in the fourth quarter of 2009.
At the regional level, the worldwide slowdown in the economic recovery is holding back foreign demand for goods made in Michigan, resulting in a deceleration in the growth of production activities which holds up the creation of new jobs.
In June, Michigan's exporting companies were disappointed with the growth of selling their goods overseas. Following an increase of 0.1 percent in May, exports of goods made-in-Michigan dropped $222.7 million or 6.0 percent.
The latest monthly drop brought state merchandise exports to $3,505.8 million, adjusted for seasonal variation, a statistical technique that smoothes out monthly fluctuations for factors such as the number of working days in a month and thus gives a clear picture of monthly trends similar to the national trade numbers.
Compared with last year, June’s reading in state exports indicates that Michigan's exporters posted gains in selling their goods abroad. In June of this year, state companies shipped abroad $1,260.1 million, or 56.1 percent, more goods than in June 2009.
At the national level, exports of goods fell 2.2 percent in June to $105.0 billion from May. The decline in U.S. exports mainly reflected drops in capital goods; industrial supplies and materials; and foods, feeds and beverages, which hit their lowest level since September 2009.
The June snapshot of Michigan's international trade numbers reflect a mix of different developments in the international demand for goods made in Michigan's major exporting industries. Sales abroad of manufactured goods — the foreign engine of state economic development and a key generator of jobs — accounted for 89 percent of all exports in June.
Manufacturer’s foreign sales from Michigan companies decreased in June by 3.1 percent from the previous month to $3,119.7 million, adjusted for seasonal variation.
Compared with June of last year, the latest volume of shipments abroad from state factories was $1,204.6 million higher. The industrial mix of state exports of manufactures implies that one in every four local factory jobs in Michigan is tied to exports.
Exports of non-manufactured goods went down 24.3 percent in June to $386.1 million, seasonally adjusted, from May.This group of shipments abroad consists of agricultural goods, mining products and re-exports, which are foreign goods that entered Michigan as imports and are exported in substantially the same condition as when imported.
How did Michigan's companies fare in export growth through the first half of this year, which in turn impacts jobs and overall economic development in the state? Michigan ranked first in export growth among the 50 states during the first six months of the year.
Particularly in comparison with the first six months of 2009, foreign sales from Michigan's companies, seasonally adjusted, increased by an annual rate of 56.8 percent. This compares with a national average of 22.2 percent during the same period.
Looking forward, leading indicators point to a weakening outlook for export growth. According to a recent business survey conducted by the Institute of Supply Management, the nation’s supply executives continue to see the short-term prospects for their foreign sales favorably but not as good as in the recent past.
The research institute reported that their export orders index grew in July for the 13th consecutive month. The recent readings indicate that although incoming export orders from foreign buyers continue to grow, the increase in the last two months was at a slower pace than in the first five months of 2010.
In the group of about 400 executives representing the largest U.S. corporations that sell their products overseas, 20 percent reported higher export orders in July from June’s levels; 73 percent reported no change in the volume of incoming export orders from the previous month; and only 7 percent reported lower export orders.
Evangelos Simos, chief economist of the consulting and research firm e-forecasting.com, is editor for International Affairs in the Journal of Business Forecasting. Simos may be reached at firstname.lastname@example.org