Exporters suffer poor quarter but better times ahead
Modest gains in worldwide merchandise trade last year marks the third consecutive year of trade growth of less than 3 percent.
“Trade growth has been disappointing in recent years, due largely to prolonged sluggish growth in GDP following the financial crisis,” said Roberto Azevedo, director-general of the World Trade Organization, presenting the agency’s annual Trade Statistics and Outlook report in Geneva.
Since the 1990s, global trade has grown about twice as fast as worldwide income measured by the sum of all countries’ GDPs expressed in U.S. dollars. The report points out that in the last three years, trade growth fell to the same rate as GDP growth, so global trade has shifted from a 2:1 to a 1:1 relation with income, which Azevedo calls a “gloomy picture” for exports.
China was the world’s top merchandise exporter for a sixth year in a row, accounting for 12.4 percent of world merchandise exports. Chinese exporting companies sold $2.3 trillion worth of goods worldwide in 2014, which was 6 percent more than in 2013.
American exporting companies had a good year in 2014, shipping abroad $1.6 trillion worth of goods. National merchandise exports rose 3 percent in 2014, following an increase of 2 percent in 2013. As a result, WTO ranked the United States the world’s second-largest merchandise exporter in 2014.
Germany was ranked as the world’s No. 3 exporter in merchandise trade in 2014. German exporters sold $1.5 trillion worth of goods worldwide, which was 4 percent more than in 2013.
In sum, worldwide exports of goods rose 1 percent to $19 trillion in 2014, a deceleration from the previous year’s 2 percent growth. The world’s top three exporters — China, the United States and Germany — accounted for 29 percent of the world’s exports last year.
In the first three months of 2015, national exports of goods hit $381 billion, which is $19 billion or 4.8 percent less than the same period in 2014. The monthly numbers for 2015 indicate American foreign sales declined in line with a fall in overall worldwide trade amid a European economic stagnation and weakening economic growth in emerging countries.
A slowdown in the foreign demand for American products holds back corporate sales, leading to shrinking profitability and stalls capital expenditures; thus, fading exports adversely affect the creation of new jobs.
How well have Michigan's exporters done so far in 2015?
During the January-March period, exports of goods from Michigan, seasonally adjusted, decreased by an annual rate of 6.1 percent from the same period of 2014. 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 37th in state export growth in the first three months of this year.
The latest monthly trade numbers show exports from Michigan's companies plunged 10.4 percent in March from the previous month, following an increase of 2.5 percent in January. In March, foreign sales registered $4.17 billion, seasonally adjusted, which is $486.1 million less than in February.
Was March’s performance in state exports equal across industries? Manufactured goods, a major contributor to export-related jobs, accounted for 83 percent of all state exports. Foreign shipments from Michigan's manufacturers decreased in March by 11.3 percent from the previous month to $3.45 billion, adjusted for seasonal variation.
On an annual basis, overseas sales from state factories were $638.9 million, or 12.8 percent, lower than in March of last year.
Exports of non-manufactured goods went down 5.9 percent in March to $725.1 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 as when imported.
What is the outlook for global trade for the rest of 2015 and in 2016, 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 forward we expect trade to continue its slow recovery, but with economic growth still fragile and continued geopolitical tensions, this trend could easily be undermined,” Azevedo said. “Forecasts for trade growth in 2015 and 2016 only surpass expected output growth by a small margin.”
WTO predicts the volume of world merchandise trade — dollar values adjusted for price change to provide a measure of quantities — to pick up only slightly over the next two years, rising from 2.8 percent in 2014 to 3.3 percent in 2015 and eventually to 4 percent in 2016.
The projections suggest Michigan companies will continue to receive larger export orders from foreign buyers this year relative to 2014. It also implies 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.