European slowdown catches up with Michigan exporters
The economic stagnation in Europe and the slowdown in emerging economies have become a drag on worldwide trade.
Recently released statistics by the World Trade Organization show that global exports plunged 10.4 percent to $1.24 trillion in the first month of 2015 from a year ago, which was the lowest monthly trade reading since February 2011.
In the first snapshot of the year, national exports of manufactures — the leading contributor of U.S. total exports — fell for a third month in a row to a monthly mark of $104.9 billion, the lowest level of factory shipments abroad since November 2012.
Slower economic growth abroad translates to lower demand for state exports. A lower rate of export growth weakens overall sales for local companies, erodes corporate profitability and reduces job creation.
2015 dawns with no good news for state exporters. Exports of goods made in the Wolverine State fell $56.9 million, or 1.2 percent, to a monthly total of $4.55 billion in January, adjusted for seasonal variation — a statistical process that equalizes monthly performance for factors such as the number of days in a month and holidays.
On an annual comparison, foreign shipments from Michigan, seasonally adjusted, increased in January by an annual rate of 0.8 percent from the same month in 2014. As a result, Michigan ranked 22nd in export growth among states in January.
Exports of manufactured goods were the key contributor of foreign sales in January, accounting for 85 percent of all state exports. Overseas shipments from manufacturing companies decreased by 1.6 percent from the previous month to $3.85 billion, adjusted for seasonal variation.
Exports of non-manufactured goods went up 1.0 percent in January to $705.2 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.
At the national level, exports of goods, adjusted for seasonal variation, fell 4.1 percent in January to $128.7 billion, mainly reflecting deep declines in industrial supplies and materials.
The outlook over the next few months for exports of manufactured goods depends on the pace of incoming orders from foreign buyers. According to the February business survey conducted by the Institute of Supply Management, the nation’s purchasing executives continue to be pessimistic about the prospects of selling abroad their products.
The Tempe, Ariz.-based research institute reported its export indicator showed a contraction in incoming export orders for the second month in a row, after 25 consecutive months of growth. In addition, the February reading of their export gauge indicated that orders from abroad were declining at a faster pace than in January.
In the February survey, from the pool of respondents of the largest manufacturers who sell their products abroad, only 11 percent reported greater export orders from January; 75 percent reported no change in export orders from the previous month; and 14 percent reported smaller export orders from January.
Evangelos Simos is chief economic adviser of the consulting and research firm e-forecasting.com. He can be reached at email@example.com.