Exports from Michigan rise 1.6 percent in June

August 31, 2009
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Indicators that gauge current economic conditions around the globe show that the economies of industrial countries stabilized in the second quarter of this year. In its Aug. 19 report, the Organization of Economic Cooperation and Development — a Paris-based economic research think-tank of the 30 richest countries — announced that the combined income of its members did not fall in the second quarter of 2009, after six consecutive quarters of steep declines.

Good economic conditions in foreign countries lead to improved demand for American goods in general and for goods made in Michigan in particular. OECD announced that the Gross Domestic Product — the best overall measure of a country’s economic wellbeing — rose in Germany, France and Japan in the second quarter, although it continued to decline in the United States.

We are in a leveling out of the global demand for goods made in Michigan as turbulent parts of the worldwide recession seem to be past. There is more encouraging news for state exporting companies regarding the value of the dollar. Since March of this year, the value of the dollar against the currencies of our major trading partners declined by 9 percent, thus making American goods 9 percent cheaper for foreign buyers.

Signals from international trade statistics point to an end of the freefall in sales abroad. Although exports linger to a large extent below year-ago levels, the combination of improving global demand and a low dollar has begun to perk up orders from overseas.

According to the latest snapshot of state trade numbers, foreign sales of made-in-Michigan goods rose $35.1 million or 1.6 percent in June, following a decrease of 9.7 percent in May.

The latest rise brought monthly exports to the $2,227.2 million mark, adjusted for seasonal variation — a technique that mitigates monthly fluctuations for factors such as number of working days in a month and thus gives a clear picture of monthly trends similar to the national trade numbers.

In comparison with last year, June’s numbers of state exports show that Michigan's companies did not post gains in selling their goods overseas. In June 2009, exporting companies shipped overseas $1,675.6 million, or 42.9 percent, less goods than in June 2008.

The June picture of Michigan's international trade numbers mirrors a mix of different trends in foreign demand for the state’s major exporting industries. International sales of manufactured goods — the foreign contributor to the state’s economic development and an important generator of jobs — accounted for 86 percent of all exports in June.

Foreign sales from Michigan's manufacturers increased in June by 2.6 percent from the previous month to $1,903.6 million, adjusted for seasonal variation.

Compared with June of last year, the latest reading of shipments abroad from state factories was $1,406.7 million lower. This is important news for economic development and jobs in the Michigan. It is estimated that one in every four local factory jobs is tied to exports because of the industrial mix of state exports of manufactures.

Moreover, production of manufactured goods supports jobs in a wide range of other industries. A good example is the transportation of raw materials and final goods destined for overseas to and from Michigan's factories.

In view of that, for every 100 jobs tied to exports of manufactured goods, there are another 100 supporting jobs in non-manufacturing industries, mainly wholesale and retail trade, transportation, business services and to a lesser degree utilities, mining and agriculture.

Exports of non-manufactured goods went down 3.8 percent in June to $323.6 million, seasonally adjusted, from May. This group of shipments abroad consists of agricultural goods, mining products and re-exports, which are foreign goods that entered Michigan as imports and then are exported in substantially the same condition.

At the national level, exports of goods rose 2.3 percent in June to $84.0 billion, adjusted for seasonal variation, from May, reflecting strong sales of foods feeds and beverages, and industrial supplies and materials.

The performance of national exports is a major contributor to GDP growth and jobs. In the first six months of 2009, U.S. exports of goods plummeted by 23.6 percent from the first six months of 2008. The U.S. economy lost 3.5 million jobs in the first six months of this year and GDP declined by 6.4 percent in the first quarter and by 1.0 percent in the second quarter.

How did Michigan's companies fare in export growth through the first half of this year, which in turn impacts jobs and economic development in the state? Michigan ranked 47th in export growth among the 50 states during the first six months of 2009. Particularly, in comparison with the first six months of 2008, foreign sales from Michigan's companies, seasonally adjusted, decreased by an annual rate of 38.7 percent.

Leading economic indicators point to an improving outlook for exports. According to the July business survey conducted by the Institute of Supply Management, the nation’s supply executives found the first signs of recovery in export markets. The Tempe, Ariz.-based research institute reported that its export orders index showed an expansion in July, following nine consecutive months of contraction.

In the group of about 400 executives representing the largest U.S. corporations that sell their products overseas, 16 percent reported higher export orders in July from June’s levels, 69 percent reported no change in export orders and 15 percent reported lower export orders.

Evangelos Simos, chief economist of the consulting and research firm Infometrica Inc., is editor for International Affairs in the Journal of Business Forecasting, and professor/department chair at the Whittemore School of Business & Economics, University of New Hampshire. Distributed by Infometrica Inc. Simos may be reached at eosimos@infometrica.com

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