Michigan exports dropped 71 percent in August
In its latest press release on global trade flows, the World Trade Organization announced that "the value of world merchandise trade rose around 25 percent in the first six months of 2010, up strongly from the same period of 2009," totaling $7.1 trillion dollars.
According to WTO's trade figures on exports for the first half of this year, the United States was ranked the second largest exporter in the world.
China was the world’s leading exporter, selling abroad $705 billion worth of exports in the first six months of this year. Germany, which last year was the leading exporter, moved to third place, recording $605 billion in foreign sales. Japan was ranked the world’s fourth exporter, shipping abroad $362 billion of merchandise. The four-country, combined value of exports accounts for one-third of all exports in the world in the first half of 2010.
At the state level, the latest trade numbers show that shipments abroad from Michigan exporters dropped 7.1 percent in August, following an increase of 10.6 percent in July. As a result, $3,605.1 million worth of goods left Michigan going to international markets in August.
The state trade figures are adjusted for seasonal variation by e-forecasting to bring them in line with the national trade numbers — a statistical process that smoothes out monthly fluctuations for factors such as the number of days in a month and holidays, thus truly providing a clear picture of monthly performance similar to the national numbers.
On an annual basis, last August’s numbers indicate that exporters posted gains in foreigners’ demand for goods made in Michigan. In August of this year, exporters shipped overseas $796.8 million, or 28.4 percent, more goods than in August of last year.
Manufactured goods, an important contributor to the growth of international trade and premier generator of local jobs, accounted for 87 percent of all state exports in August. Exports from state manufacturers decreased in August by 10.0 percent from the previous month to $3,129.3 million, adjusted for seasonal variation.
How do Michigan manufacturers compare to their performance a year ago? August’s foreign shipments from state factories were $703.8 million, or 29.0 percent, higher than in August of last year.
Exports of non-manufactured goods went up 18.8 percent in August to $475.8 million, adjusted for seasonality. This group of shipments abroad consists of agricultural goods, mining products and re-exports, which are foreign goods that entered the state as imports and are exported in substantially the same condition.
For the country as a whole, America’s exports of goods, seasonally adjusted, remained flat in August at $ 107.7 billion. The monthly stagnation in exports of goods reflected weak demand in the summer months due to the slowdown in the global economic recovery, particularly evidenced in the European political and economic turmoil.
Looking at export growth in 2010, a measure of the degree of success that state companies achieve in gaining access to foreign markets, Michigan ranked first among the 50 states during the first eight months of this year. Compared to the same period in 2009, foreign sales from Michigan's companies, seasonally adjusted, increased by an annual rate of 49.4 percent. So far this year, America’s exports rose 22 percent.
Strong global economic growth is a major driver of the demand for goods made in Michigan. When economic growth strengthens, buyers’ incomes abroad increase and, consequently, state exporters not only receive larger orders from existing foreign clients but they are able to sell to new clients as their standard of living perks up.
What are the prospects for exports for the rest of the year and in 2011 for Michigan's companies? In its new semiannual economic report published this month, the International Monetary Fund “(does) not expect a double-dip recession (as) the probability that for the world as a whole growth would be less than 2 percent is under 5 percent.”
Presenting IMF’s World Economic Outlook, Olivier Blanchard, IMF's director of research, amply pointed out that “the world economic recovery is proceeding, but it is sluggish in advanced countries and it is much stronger in emerging and developing economies.”
Given the uneven recovery pattern, IMF projects global growth to average 4.8 percent in 2010 following a decline of 0.6 percent in 2009. In 2011, global economic growth is forecast to slow down to an average rate of 4.2 percent, implying that next year the world economy will not be better off than this year.
In the key export markets of the advanced economies that include Europe, North America and Japan, economic growth is forecast to be 2.2 percent in 2011. However, IMF forecasts the emerging and developing economies to advance by an average growth rate of 6.4 percent in 2011, about three times faster than the industrial countries.
More important for Michigan's exporters, the IMF predicts the volume of international trade to also slow down in 2011. The World Economic Outlook forecasts growth in worldwide trade to slow down to 7 percent in 2011 from 11.4 percent in 2010. Worldwide trade declined by 11 percent in 2009.
In conclusion, IMF’s Blanchard said that "the need for a careful (policy) design at the national level and collaborative action at the global level may be even more important today than they were in the peak of the crisis a year and a half ago.”
Accordingly, Michigan companies doing business abroad are expected to witness a weakening in export orders from their major foreign markets next year, especially from advanced economies.
Evangelos Simos is chief economist of the consulting and research firm e-forecasting.com.