State’s export plunge wipes out earlier gains
In the first eight months of 2014, the value of world merchandise exports rose 2.6 percent to $11.3 trillion dollars from the same period in 2013, according to the latest numbers released by the World Trade Organization.
WTO’s trade figures on exports from January-August show the United States moved down to third place after years of ranking as the second largest exporter in the world. So far this year, foreign sales hit $1.08 trillion, which is $34 billion or 3.3 percent more than during the first eight months of 2013.
China was the world’s leading exporter, selling abroad $1.48 trillion worth of exports so far this year, representing 3.8 percent more than in 2013. Germany moved up as the second largest exporter with foreign sales hitting $1.025 trillion, or 6.8 percent more than during the first eight months of 2013. Japan was ranked as the world’s fourth-largest exporter, selling abroad $458 billion of merchandise this year.
The four countries’ combined value of exports accounted for one-third of all exports in the world in the first eight months of 2014.
At the state level, the latest trade statistics show foreign sales from Michigan exporting companies plunged 21.4 percent in August, following an increase of 16.1 percent in July. As a result, $4.27 billion worth of goods left Michigan going to international markets in August.
The state export numbers are adjusted for seasonal variation to bring them in line with the national trade numbers.
On an annual basis, Michigan exporters sold $707.9 million, or 14.2 percent, less goods than in August of last year.
Exports of manufactured goods — an important contributor to overall economic development and the driving force of local jobs — accounted for 86 percent of all state exports in August. Shipments abroad from state factories decreased in August by 20.1 percent from the previous month to $3.66 billion, adjusted for seasonal variation.
How do Michigan manufacturers compare to their performance a year ago? August’s foreign shipments from state manufacturing companies were $688.8 million, or 15.8 percent, lower than in August of last year.
Exports of non-manufactured goods went down 28.7 percent in August to $608.3 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, stalled in August to $138.8 billion, the same value as in the previous month.
Looking at export growth in 2014, a gauge of the state’s performance in penetrating competitively international markets, Michigan ranked 35th among states during the first eight months of this year. Compared to the same period in 2013, foreign sales from Michigan's companies, seasonally adjusted, decreased by an annual rate of 1.9 percent. So far this year, national exports of goods rose 4.3 percent, which is the 50-state average growth rate.
What is the outlook for the rest of the year and in 2015 for Michigan's exporting companies? It depends mainly on foreign buyers’ finances, which are affected by economic growth in their countries. The faster the buyers' income in the partner countries grow, the higher their demand for goods made in Michigan will be.
In its new semiannual World Economic Outlook published this month, the International Monetary Fund evaluated global economic conditions and provided evidence that the global economy is "still struggling to get on track."
IMF projects global economic growth to average 3.3 percent this year, the same increase as in 2013. For 2015, IMF predicts global economic growth to edge up 3.8 percent, implying that next year the world economy will be slightly better in comparison to this year.
The weaker-than-expected growth outlook for 2014 reflects setbacks to economic activity in the advanced economies during the first half of this year. In the key export markets of the industrial economies that include United States, European economies, Canada, Australia and Japan, IMF predicts economic growth to average 1.8 percent in 2014.
“These worse prospects are in turn affecting confidence, demand and growth today,” said Olivier Blanchard, economic counselor and head of IMF’s research department. “Global growth is still mediocre.”
More important for Michigan’s exporters, IMF predicts the volume of exports for industrial countries to average 3.6 percent in 2014 and accelerate to 4.5 percent in 2015. The worldwide trade forecasts compare unfavorably with actual trade growth rates of 12.6 percent in 2010 and 6.1 percent in 2011.
In view of these trends, Michigan companies doing business abroad are expected to witness somewhat better levels of export orders from their major foreign markets next year, especially from clients in emerging economies.
Evangelos Simos is chief economic adviser of the consulting and research firm e-forecasting.com. He can be reached at email@example.com.