Michigan joins the plunge in international trade
International trade around the world is in a free fall this year. In the first five months of 2015, the value of worldwide merchandise exports fell 11.3 percent to $6.3 trillion from the same period in 2014.
The trade figures on exports, released by the World Trade Organization, indicate that, so far this year, the United States ranked as the second-largest exporter in the world with foreign sales hitting $630 billion, which is $34 billion, or 5.1 percent, less than in 2014.
China was the world’s leading exporter selling $881 billion worth of exports in the first five months of 2015, which was about the same as last year during the same period.
Germany, the export engine of the European Union, maintained its third-place ranking by posting $546 billion in foreign sales so far in 2015, a decline of 14.2 percent from 2014.
Japan was ranked as the world’s fourth-largest exporter, selling $262 billion of merchandise this year, which is 7.8 percent less than in 2014.
The four-country combined value of merchandise exports accounts for 37 percent of all exports in the world in the first five months of 2015.
The latest snapshot of international trade numbers at the state level shows foreign sales of goods made in Michigan plunged in May by 11.8 percent, after an increase of 8.1 percent in April. Michigan's exporters shipped overseas $4.13 billion in goods in May, adjusted for seasonal variation — a statistical technique that, like with national numbers, smoothes out monthly fluctuations for factors such as the number of working days in a month and thus reveals a lucid picture of monthly trends.
Compared with a year ago, Michigan’s exporting companies this May fell behind their export performance in May 2014 by $708.3 million, or 14.6 percent.
Michigan's foreign sales in May reflected the mix of trends in foreigners’ demand for goods made by different industries. Overseas shipments from Michigan's manufacturers — which accounted for 85 percent of all exports — decreased to $3.52 billion, seasonally adjusted, 11.8 percent less than April’s level of factory shipments.
Exports of non-manufactured goods dropped 12.4 percent in May to $609.5 million, adjusted for seasonal variation. This group of foreign sales 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 as when imported.
Merchandise exports for the country as a whole fell by 1.3 percent in May to $127.7 billion, adjusted for seasonal variation. So far this year, national exports of goods have edged up by an annual rate of 2.1 percent from the same period a year ago.
How does Michigan match up among states in export growth in 2015? In the first five months of the year, foreign sales from Michigan's companies — seasonally adjusted — decreased by an annual rate of 7.9 percent compared with the first five months in 2014. As a result, Michigan ranked 36th among states in export growth so far this year.
What are the prospects for growth in the world economy, which would drive demand for goods made in Michigan during the rest of this year and in 2016?
In its July update of the2015 World Economic Outlook, the International Monetary Fund cut its worldwide economic outlook for this year from its projection made last April. According to the report, global growth is forecast now at 3.3 percent in 2015, implying that this year the world’s output will grow at a slower pace than in 2014.
IMF’s latest outlook predicts economic growth in the industrial countries to register 2.1 percent in 2015, weaker than its April 2015 projection of 2.4 percent. In 2016, growth in industrial countries is expected to slightly accelerate at an annual rate of 2.4 percent.
The Washington, D.C.-based international organization forecasts economic growth for emerging and developing countries — the group that includes China, India and Brazil — to hit 4.2 percent in 2015 and 4.7 percent in 2016.
Important for Michigan's exporting companies, the IMF forecasts the volume of global trade to grow 4.1 percent in 2015 and then to accelerate to 4.4 percent in 2015, compared to an increase of 3.2 percent in 2014.
IMF’s outlook predicts worldwide imports of the industrial countries to increase by 4.5 percent in 2015. However, worldwide imports of emerging and developing countries are forecast to edge up by 3.6 percent in 2015.
Consequently, high-income industrial countries will drive foreign demand for Michigan’s exports — contributing to local production and jobs — more than emerging and developing countries.
Evangelos Simos is chief economic adviser of the consulting and research firm e?forecasting.com. He may be reached at email@example.com.