Michigan exporters should look to emerging economies for growth
On April 12, the World Trade Organization announced a summary of world trade statistics and prospects from its forthcoming 2012 annual report. China was the world’s top merchandise exporter for the third year in a row, accounting for 10 percent of world merchandise exports. Chinese exporting companies sold $1.9 trillion worth of goods worldwide in 2011, which was 20 percent more than in 2010.
American exporters had one of their best years in 2011, shipping abroad $1.48 trillion worth of goods. National merchandise exports rose 16 percent in 2011, following a surge of 21 percent in 2010. As a result, WTO ranked the United States the world’s second largest merchandise exporter in 2011.
Germany ranked as the world’s No. 3 exporter in merchandise trade in 2011. German exporters sold $1.47 trillion worth of goods worldwide, which was 17 percent more than in 2010.
Worldwide, exports of goods rose 20 percent, to $19 trillion, in 2011, a moderate deceleration from the previous year’s surge of 22 percent — the fastest growth rate on record in global export statistics going back to 1950. The world’s top three exporters — China, the U.S. and Germany — accounted for 27 percent of the world’s exports last year.
In the first two months of 2012, national exports of goods rose to $256 billion, which is $20 billion or 8.3 percent more than the same period in 2011. The monthly numbers for 2012 indicate that American foreign sales continue to grow, but at a slower pace than a year ago amid a recession in Europe and a weakening in economic growth in emerging countries, especially China.
Dwindling growth in exports leads to a slowdown in overall corporate sales, profitability and capital expenditures; thus, it adversely affects creation of new jobs.
How well have Michigan's exporters done so far in 2012?
During the January-February period, exports of goods from Michigan, seasonally adjusted, increased by an annual rate of 15.7 percent from the same period of 2011. Like the national numbers, state trade figures are adjusted for seasonal variation, a statistical process that smoothes volatility in monthly data by eliminating the effects of uneven recurring events such as the number of days in a month and holidays, thus providing a better picture of the underlying trend in exports.
Michigan ranked 17th in export growth among states in the first two months of this year.
At the state level, the latest snapshot of monthly trade numbers shows exports from Michigan's companies dipped 0.3 percent in February from the previous month, following an increase of 11 percent in January. At their February mark, foreign sales registered $4.69 billion, seasonally adjusted, which is $14.5 million less than in January.
Was February’s performance in state exports broad-based? Manufactured goods, a major contributor of export-related jobs, accounted for 87 percent of all state exports. Foreign shipments from Michigan’s manufacturers decreased in February by 1.2 percent from the previous month to $4.07 billion, adjusted for seasonal variation.
On an annual basis, overseas sales from state factories were $679.7 million, or 23.1 percent higher than in February of last year.
Exports of non-manufactured goods went up 6.1 percent in February to $617.9 million, adjusted for seasonal variation. This group of shipments abroad consists of agricultural goods, mining products and re-exports, which are foreign goods that have entered the state as imports and are exported in substantially the same condition.
What is the outlook for global trade for the rest of 2012 and in 2013, which will influence the demand for Michigan's foreign sales and eventually the state’s overall economic development along with the future of export-related jobs?
“More than three years have passed since the trade collapse of 2008-09, but the world economy and trade remain fragile. The further slowing of trade expected in 2012 shows that the downside risks remain high. We are not yet out of the woods,” said WTO Director-General Pascal Lamy, who presented summary results of the 2012 report on trade and economic prospects.
Looking forward, the WTO report emphasized the need for its members to “turn their attention to revitalizing the trading system … (because) the sluggish pace of recovery raises concerns that a steady trickle of restrictive trade measures could gradually undermine the benefits of trade openness. It is time to do no harm."
The Geneva-based organization — which deals with the rules of trade between nations helping producers, exporters, and importers who conduct their worldwide business — forecasts the volume of world merchandise exports to increase by roughly 3.7 percent in 2012 and by 5.6 percent in 2013. Trade volume measures exports in units of goods by adjusting dollar values of exports for price changes.
Specifically, WTO predicts trade expansion in 2012 to be particularly strong in the developing countries with exports rising by 5.6 percent, while in the industrial countries exports will increase by just 2 percent.
The WTO forecasts a continuation of growth in global trade at a slower pace in 2012. The projections suggest that Michigan companies will continue to receive bigger export orders from foreign buyers this year, but the increases will not be as good as in the past. It also suggests that there will be better export opportunities for local exporters in the emerging economies than in the industrial countries.
Evangelos Simos is chief economist of the consulting and research firm e-forecasting.com. He may be reached at email@example.com