Despite slide, state exporters outpace national numbers
According to the latest numbers on global trade flows released by the World Trade Organization, in the first three months of 2013 the value of world merchandise exports fell 4.1 percent to $4 trillion from the same period in 2012.
WTO’s export statistics from January-March show that the United States ranked as the second largest exporter in the world with foreign sales hitting $393 billion, $5.4 billion or 1.4 percent more than during the first three months of 2012.
China was the world’s leading exporter, selling $509 billion worth of exports so far this year. Germany, the export engine of the European Union, maintained its third place posting with $354 billion in foreign sales in 2013. Japan was ranked the world’s fourth-largest exporter, selling $177 billion of merchandise this year. The four-country combined value of exports accounted for 36 percent of all exports in the world in the first three months of 2013.
At the state level, the latest trade numbers show that shipments abroad from Michigan companies dropped 8.3 percent in March, following a decrease of 1.8 percent in February. As a result, $4.36 billion worth of goods left Michigan going to international markets in March.
The state trade figures are adjusted for seasonal variation by e-forecasting to bring them in line with the national trade numbers — a statistical process that smoothes out monthly fluctuations for factors such as the number of days in a month and holidays, thus providing a clear picture of monthly performance similar to the national numbers.
On an annual basis, March’s numbers indicate that exporters did not post gains due to foreigners’ demand for goods made in Michigan. In March of this year, exporters sold $253.9 million, or 5.5 percent, less goods than in March of last year.
Manufactured goods, an important contributor in the creation of local jobs, accounted for 83 percent of all state exports in March. Exports from state manufacturers decreased in March by 11.4 percent from the previous month to $3.62 billion, adjusted for seasonal variation.
How do Michigan manufacturers compare to their performance a year ago? March’s foreign shipments from state factories were $346.8 million, or 8.7 percent, lower than in March of last year.
Exports of non-manufactured goods went up 10.4 percent in March to $740.4 million, adjusted for seasonal variance. 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, America’s exports of goods, seasonally adjusted, fell in March by 1.4 percent to $130.3 billion. The latest drop in merchandise exports reflected declines infoods, feeds, and beverages; automotive vehicles, parts, and engines; industrial supplies and materials; capital goods; and consumer goods.
Looking at state export growth in 2013, a measure of the companies' success in increasing their market share into foreign markets, Michigan ranked 20th among states during the first three months of this year. Compared to the same period in 2012, foreign sales from Michigan's companies, seasonally adjusted, increased by an annual rate of 1.9 percent. So far this year, national exports of goods rose 1.4 percent, which is the 50-state average growth rate.
What is the outlook for exports for the rest of the year and in 2014 for Michigan's companies? It depends mainly on foreign buyers' finances, which are affected by economic growth in their countries. The faster the buyers' countries grow, the higher their demand for goods made in Michigan.
In its new semiannual World Economic Outlook published at the end of April, the International Monetary Fund evaluated global economic conditions and provided evidence that the world economy has moved to "a three-speed recovery." Emerging markets, like China, India and Brazil, are still going strong, followed by the United States with modest growth and high unemployment, and lastly the Euro Area, which is in a double-dip recession.
Presenting IMF’s World Economic Outlook, Olivier Blanchard, IMF's director of research, pointed out that “given the strong interconnections between countries, an uneven recovery is also a dangerous one. In some ways, the world economy is as weak as its weakest link."
IMF predicts growth in emerging economies to reach 5.3 percent in 2013, and 5.7 percent in 2014. For the United States, IMF forecasts economic growth to be 1.9 percent in 2013, and 3 percent in 2014. In contrast, in the Euro Area output is forecast to decline by 0.3 percent in 2013, and to recover only by 1.1 percent in 2014.
More important for Michigan's exporters, the IMF predicts the volume of international trade to remain weak relative to past recoveries. The World Economic Outlook forecasts growth in worldwide trade to average 3.6 percent in 2013 and accelerate to 5.3 percent in 2014. The worldwide trade forecast especially for this year is not optimistic when compared with actual global export growth rates of 6 percent in 2011 and 2.5 percent in 2012.
Michigan companies doing business abroad are expected to witness anemic levels of export orders from their major foreign markets next year, especially from clients in European countries. Based on the IMF report, investments in marketing state exports to fast growing emerging economies may help hedge against weakening demand from Europe.
Evangelos Simos is chief economic adviser of the consulting and research firm eforecasting.com. He may be reached at firstname.lastname@example.org.