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Lethargic global economy leaves its mark on Michigan
Robust economic growth around the world translates to strong foreign demand for American goods, which via exports contributes significantly to Michigan's economic development and job creation. State exports also act as a cushion to anemic and fragile domestic demand for goods made by state companies.
So far this year, global economic growth is below expectations. In the Euro Area, growth has been disappointing, with readings in industrial production in the first three months of 2014 below last December's level. Preliminary first quarter 2014 GDP numbers show overall growth for the Euro Area at an annual rate of 0.8 percent, with nil growth in France and declines in Italy and the Netherlands.
Recent indicators for China point to a high probability of a further slowdown in its economic growth to a range of 6 percent to 7 percent, compared to 9 percent in the last two years. In this lethargic environment for industrial countries and decelerating growth for emerging economies, overall global economic growth is expected to continue at a snail's pace in 2014.
What are the export trends so far this year? According to recently released international trade statistics, exports of goods for the country as a whole fell 0.4 percent in April to $135.1 billion, adjusted for seasonal variation. In the first four months of 2014, national exports of goods grew by an annual rate of 2.1 percent from the same period a year ago, compared to 1.1 percent in 2013, and 6.6 percent in 2012 for the same period.
At the state level, the latest snapshot of foreign sales shows that exports of goods made in the Wolverine State fell by 2.4 percent in April, following an increase of 3.2 percent in March. Michigan's exporters shipped abroad $4.74 billion in goods, adjusted for seasonal variation, a statistical technique that smoothes out monthly fluctuations for factors such as the number of days in a month and holidays, thus making state monthly trade indicators comparative to the national numbers.
Were Michigan's exporting companies better off in April of this year than a year ago? The latest statistics indicate state exporters fell behind their previous year’s monthly foreign sales by $132.7 million, or 2.7 percent.
Shipments abroad from Michigan's manufacturers led April’s foreign sales, accounting for 81 percent of all exports. In April, exports of manufactures decreased 3.3 percent from March to $3.86 billion, seasonally adjusted.
How did Michigan's exporters fare among states in foreign sales growth in the first four months of 2014? In comparison to the same period of 2013, exports from Michigan's companies — seasonally adjusted — increased by an annual rate of 0.1 percent, compared with 2.1 percent average growth for all states.
As a result, Michigan ranked 24th among states through the first four months of 2014 in export growth.
What are the prospects for international trade in the second half of the year, which determines the demand for Michigan's exports and ultimately will have an effect upon thousands of export-related jobs and overall economic development? The latest forward-looking global indicators point to an upcoming recovery for state exporters.
According to the latest findings of the World Economic Survey, conducted in the second quarter of 2014 by the Ifo Institute of Economic Research at the University of Munich and the Paris-based International Chamber of Commerce, the global economic climate fell in the second quarter and expectations for the second half of the year were clouded.
Reporting the results of the survey, Hans-Werner Sinn, president of the research institute, underscored that “assessments of the present situation remain satisfactory (and) the six-month economic outlook clouded over slightly but remains friendly overall.”
About 1,200 executives from 121 countries participating in the international survey appraised the current worldwide economic conditions to be substantially below those in the second quarter of 2013.
Important to Michigan's exporting companies are the findings of the World Economic Survey about international trade. The business experts from around the world anticipate the global volume of trade to increase in the second half of 2014, compared to current levels of export activity.
The expectation of gains in worldwide trade translates to good news for Michigan's exporters. In the second half of 2014, orders from abroad, especially from emerging economies, are forecast to moderately increase relative to current levels, which would improve production and generate new export-related jobs in Michigan.
Evangelos Simos is chief economic adviser of the consulting and research firm eforecasting.com. He may be reached at email@example.com.