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Exports from Michigan surged 162 percent in January
Looking at state exports, 2011 dawns with news that foreign shipments from Michigan's companies rose in the first month of 2011.
The first picture of the year on international trade shows that exports of goods made in the Wolverine State surged by $610.9 million to a monthly total of $4,383.4 million in January, adjusted for seasonal variation, a statistical process that equalizes monthly performance for factors such as the number of days in a month and holidays.
In addition, 2011 also started with two global economic shocks that have generated uncertainty on the future course of global trade during the year. First, oil prices have hit $100 per barrel, compared with an average price of $80 in 2010, mostly due to political turmoil in the Middle East.
The second adverse shock is the Japanese earthquake and its consequences about the spread of radioactive material from the Fukushima Daiichi Nuclear Power Station. The expected drop in economic activity in Japan — the third largest economy in the world — is estimated to have unfavorable spillover effects on other trading partner countries, particularly, in the automotive and semiconductor industries.
The latest monthly trade numbers indicate that in January of this year foreign shipments to Japanese buyers from Michigan's companies totaled $122 million. During the whole year of 2010, Michigan exporters sold to Japan $1,243 million worth of goods.
Exports of goods, and consequently export-related jobs, depend on the economic health of the buying countries. In other words, overall sales and jobs in Michigan's companies are "exposed" to the ups and downs of the global economy.
How important is the Japanese market for the state economy? In 2010, Michigan's exports to Japan accounted for 2.8 percent of total exports. As a result, Michigan ranked 41st in export exposure to the expected fallout from the Japanese shock among the 50 states. Nationally, U.S. exports of goods to Japan accounted for 4.5 percent of all exports in 2010.
Exports of manufactured goods were the key driver of foreign sales in January, accounting for 89 percent of all state exports. Foreign sales from state factories increased in January by 19.5 percent from the previous month to $3,890.3 million, adjusted for seasonal variation.
Exports of non-manufactured goods went down 4.5 percent in January to $493.1 million, adjusted for seasonal variation. This group of shipments abroad 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.
For the country as a whole, exports of goods, adjusted for seasonal variation, rose 3.4 percent in January to $120.5 billion.
What are the economic prospects for Japan in 2011 given the limited information we have today? Forecasters have begun to provide some estimates of the effects of the Japanese catastrophe. Economic growth is expected to either stall or decline in 2011 by as much as 1.1 percent, compared to a healthy recovery in 2010 by 3.9 percent.
The increased dependence of the state’s economy on global markets via exports coupled with the twin economic shocks that recently hit the global economy are expected to contribute less to the state's overall economic development in 2011 than what was initially estimated.
Evangelos Simos is chief economist of the consulting and research firm e-forecasting.com. He may be reached at email@example.com