States exports jumped last year but trouble is brewing
At the tail end of 2011, monthly exports from Michigan’s exporters rose to $4.24 billion, from $4.18 billion in November, adjusted for seasonal variation, a statistical process that smoothes out recurring volatility in the state’s monthly indicators for factors such as the number of days in a month and holidays and brings them in line with national indicators.
December’s 1.3 percent rise in foreign shipments from Michigan’s companies followed an increase of 4.5 percent in November. On an annual basis, in December state exporters sold abroad goods worth $456.4 million, or 12.1 percent more than in December 2010.
Was 2011 a good year for Wolverine State exporting companies and, consequently, a good year for economic development and jobs related to exports? For all of 2011, exports of goods made in Michigan rose by $6.3 billion to $50.8 billion, compared to exports of $44.5 billion in 2010.
How well did Michigan's exporting companies do in growing their sales abroad during 2011? State exporters found the value of their international sales to have increased by 14.2 percent for the entire year, compared to an average increase of 16.3 percent for the nation as a whole. As a result, Michigan ranked 29th among states in export growth in 2011.
The latest numbers of international trade display a combination of economic and business conditions in the destination countries and also foreign buyers’ preferences — regarding product quality, new features, durability and price — for various goods made in Michigan, from business equipment to consumer goods, parts and raw materials.
State exports of manufactured goods — a major contributor of local jobs because of the heavy labor requirements involved — accounted for 85 percent of all foreign sales in December. Shipments abroad from Michigan's factories increased in December by 0.6 percent from the previous month to $3.59 billion, adjusted for seasonal variation.
Michigan exports of non-manufactured goods went up 5.7 percent in December to $642.2 million, also 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.
Worldwide economic growth is an important driver of demand for goods made in Michigan. When economic growth strengthens, consumers’ incomes abroad increase. Consequently, exporting companies not only receive bigger orders from existing foreign clients, but they are able to reach out to new markets with improvements in the standard of living around the globe.
Have the economic prospects for this year and 2013 changed from new events in the geopolitical and business environment? In its latest update of the World Economic Outlook, the International Monetary Fund indicated that “the global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere.”
Presenting IMF’s World Economic Outlook on Jan. 24, Olivier Blanchard, IMF's director of research, said that “global growth prospects dimmed and risks sharply escalated during the fourth quarter of 2011.”
IMF projects global economic activity to expand by an annual growth rate of 3.3 percent in 2012. Last year’s growth rate was 3.9 percent, and 2010’s jumped 5.2 percent.
In Michigan’s key export markets of the advanced economies, also called the industrial countries (the group includes Europe, North America and Japan), economic growth is forecast to slow substantially in 2012, with overall economic activity increasing by only 1.2 percent.
However, IMF forecasts growth in the fast-growing emerging economies — such as China and India — and the developing countries to average 5.6 percent during 2012-13. Thus, the non-industrial countries will be the major source of increase in global demand for goods made in Michigan during 2012-13.
IMF predicts the volume of international trade to considerably weaken. The World Economic Outlook forecasts worldwide trade to slow to an annual rate of 3.8 percent in 2012, following an increase of 6.9 percent in 2011 and 12.7 percent in 2010.
Evangelos Simos is chief economist of the consulting and research firm e-forecasting.com. He may be reached at firstname.lastname@example.org