Michigan exporters may look toward emerging economies
The World Trade Organization this month released its annual report of world trade statistics and prospects that showed worldwide merchandise trade in 2013 was sluggish for a second year in a row.
Since the 1990s, global trade has grown about twice as fast as worldwide income measured by the sum of all countries’ GDP expressed in U.S. dollars. The WTO report points out that in the last two years trade growth fell to the same rate as GDP growth, meaning global trade has shifted from a 2:1 to a 1:1 relation with income, prompting analysts to question whether the favorable environment will ever return.
China was the world’s top merchandise exporter for the fifth year in a row, accounting for 12 percent of world merchandise exports. Chinese exporting companies sold $2.2 trillion worth of goods worldwide in 2013, which was 8 percent more than in 2012.
American exporting companies had one of their best years in 2013, shipping abroad $1.6 trillion worth of goods. National merchandise exports rose 2 percent in 2013, following an increase of 4 percent in 2012. As a result, WTO ranked the United States the world’s second largest merchandise exporter in 2013. Germany was ranked as the world’s No. 3 exporter in merchandise trade in 2013. German exporters sold $1.4 trillion worth of goods worldwide, which was 3 percent more than in 2012.
In sum, worldwide exports of goods rose 2 percent to $18 trillion in 2013, which was a moderate acceleration from last year’s zero growth. The world’s top three exporters — China, the United States and Germany — accounted for 28 percent of the world’s exports last year.
In the first two months of 2014, national exports of goods rose to $265 billion, which is $3.5 billion — or 1.3 percent — more than the same period in 2013. The monthly numbers for 2014 indicate that American foreign sales continue to grow but at a slower pace than a year ago amid a lingering recession in Europe and weakening economic growth in emerging countries.
Weaker foreign demand for American products leads to a slowdown in overall corporate sales, shrinking profitability and fewer capital expenditures. Fading exports adversely affect the creation of new jobs.
How well have Michigan's exporters done so far in 2014?
During the January-February period, exports of goods from Michigan, seasonally adjusted, decreased by an annual rate of 3.6 percent from the same period of 2013. 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.
As a result, Michigan ranked 31st in export growth among states in the first two months of this year.
The latest snapshot of monthly trade numbers shows exports from Michigan’s companies rose 3.4 percent in February from the previous month, following a decrease of 4.6 percent in January. At the February mark, foreign sales registered $4.7 billion, seasonally adjusted, which is $155.9 million more than in January.
Was February’s performance in state exports even across industries?
Manufactured goods, a major contributor to export-related jobs, accounted for 86 percent of all state exports. Foreign shipments from Michigan’s manufacturers increased in February by 2 percent from the previous month, to $4.06 billion, adjusted for seasonal variation.
On an annual basis, overseas sales from state factories were $26.8 million, or 1.1 percent lower than in February of last year.
Exports of non-manufactured goods went up 13.6 percent in February to $646.2 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 are the prospects for global trade for the rest of 2014 and in 2015, which will influence the demand for Michigan's foreign sales and eventually the state’s overall economic development along with the creation of export-related jobs?
“Looking ahead, if GDP forecasts hold true, we expect a broad-based but modest upturn in 2014, and further consolidation of this growth in 2015,” said Roberto Azevêdo, WTO’s director-general.
“For 2014, world trade should rise by 4.7 percent. This is not yet quite at the historical average, but it is better than last year. It would definitely be a step in the right direction. We foresee a 5.3 percent increase in world trade in 2015. This would be in line with the 20-year average," he said.
The projection suggests that Michigan companies will continue to receive bigger export orders from foreign buyers this year. It also suggests there will be better export opportunities for local exporters in the emerging economies than in the industrial countries.
Evangelos Simos is chief economic adviser of the consulting and research firm e-forecasting.com. He can be reached at email@example.com.