States exports are increasing but for how much longer

June 18, 2012
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In the latest monthly look at international trade numbers, exports of goods made in the Wolverine State rose by 2 percent in March to $4.784 billion, up from $4.689 billion in February, adjusted for seasonal variation — a statistical process that smoothes out monthly fluctuations for factors such as the number of days in a month and holidays, thus making them comparable with national and international export trends.

In comparison to a year ago, Michigan's exporting companies posted gains in selling their products abroad. In March, foreign outbound shipments from state companies surpassed their level during March 2011 by $235.8 million, or 5.2 percent

Foreign sales of manufactured goods dominated the state’s international trade, accounting for 84 percent of all exports. In March, exports from Michigan’s factories decreased 0.8 percent to a seasonally adjusted volume of $4.038 billion from February. On an annual basis, March’s state shipments abroad of manufactured goods were 7.1 percent higher than in March 2011.

As production of manufactured goods requires a significant amount of labor, exports of manufactured goods are a major source of jobs not only in the industry but also in other industries where their activities are related to the production and distribution of manufactured goods.

The historical relation between production and jobs for state manufacturers indicates that one in every four factory jobs in Michigan depends on the volume of foreign sales of manufactured goods.

Additionally, exports of manufactured items create ripple effects in supporting industries. Obvious examples are the production and transportation of raw materials and parts to factories, moving of final goods to ports to be shipped overseas, and banking activities for international transactions.

As a result, for every 100 manufacturing jobs tied to state exports of manufactured goods, an additional 100 jobs in the state’s non-manufacturing businesses are generated in supporting the production and distribution of exports. The industries that benefit from sales abroad of manufactured goods are mainly transportation, wholesale and retail trade, business services, and, to a lesser degree, utilities, mining and agriculture.

Exports of non-manufactured goods went up 20.7 percent in March to $745.8 million, adjusted for seasonal variation. This group of shipments abroad consists of agricultural goods, mining products, and re-exports that 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, U.S. exports of goods, seasonally adjusted, rose by 3.7 percent in March to $132.7 billion from the previous month. As a result, in the first quarter of 2012, U.S. exports of goods hit $389 billion, which is $27.7 billion, or 7.7 percent, more than in the first quarter of 2011.

How did Michigan's companies fare in export growth in the first quarter of 2012, which in turn has a bearing on jobs and overall economic development in the state? Michigan ranked 20th in export growth among states during the first quarter of this year. In comparison with the first quarter of 2011, foreign sales from Michigan's companies, seasonally adjusted, increased by an annual rate of 11.9 percent.

International trade links the ups and downs of the global economy with Michigan's exporters, thus having effects on company production activity, sales, profits and, most important, local jobs.

In its latest Economic Outlook released May 22, the Organization for Economic Cooperation and Development said “the global economy is, once again, trying to return to growth, helped by a modest pick-up of trade and an improvement in confidence.”

Introducing the outlook, Angel Gurría, OECD secretary-general, said "the prospects for the global economy are somewhat brighter than six months ago. (But) on closer inspection the global economic recovery is weak, considerable downside risks remain and sizeable imbalances have yet to be addressed."

The Paris-based economic think tank of the 35 richest countries in the world forecasts economic activity for its members to increase by 1.6 percent in 2012 and to slightly accelerate to 2.2 percent in 2013.

OECD forecasts the volume of global trade to average 4.1 percent in 2012, compared with an annual growth rate of 6 percent in 2011. For next year, OECD predicts growth in global trade to accelerate to an annual rate of 7 percent.

The projections on global growth and trade suggest an expected weakening in export orders for Michigan companies. Led by worsening foreign demand, production activity at the state level is forecast to slow down and, as a result, several export-related jobs may be lost in 2012.

Evangelos Simos is chief economist of consulting and research firm e-forecasting.com. He may be reached at eosimos@e-forecasting.com

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