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California Exports Hold Steady Despite Global Conditions

September 3, 2015 –

Screen shot 2012-06-15 at 12.12.22 PMCalifornia’s export trade in July remained on a par with the state’s export trade during the same month one year earlier, according to a Beacon Economics analysis of foreign trade data released this morning by the U.S. Commerce Department.
The state’s exports of goods to foreign markets in July totaled $13.80 billion, down 0.4% from the $13.85 billion recorded in July 2014. By way of comparison, overall U.S. merchandise exports fell by 6.8% over the same period, while exports from Texas shrank by 13.0%.
California’s exports of manufactured goods in July declined by 0.7% to $8.97 billion from $9.03 billion last year. Exports of non-manufactured goods (chiefly agricultural produce and raw materials) tumbled by 12.4% to $1.48 billion from $1.69 billion the previous July. Re-exports rose by 6.9% to $3.35 billion from $3.13 billion.
“The good news is that California’s exporters and trading companies pretty much held their own during an especially dicey time for global trade,” said Jock O’Connell, Beacon Economics’ International Trade Adviser. California’s export trade so far this year is lagging  last year’s pace by 2.4%.
Overall, sluggishness in the international economy and in global trade hasn’t affected the broader U.S. economy. “The numbers continue to look good for the U.S.,” said Beacon Economics’ Founding Partner Christopher Thornberg. “Despite recent swooning in the financial markets, not only does the U.S. economy not look fragile, it looks increasingly able to weather whatever storm is unleashed in Asia by a slowing Chinese economy.”
A Closer Look At The Numbers
As always, Beacon Economics cautions against reading too much into month-to-month fluctuations in state export statistics, especially when focusing on specific commodities or destinations. Significant variations may occur as the result of unusual developments or exceptional one-off trades and may not be indicative of underlying trends. For that reason, Beacon Economics compares the latest three months for which data are available (i.e., May – July) with the corresponding period one year earlier.
California’s merchandise exports during the May-July period totaled $43.03 billion, a nominal decline of 1.7% from the $43.79 billion recorded during the same period twelve months earlier. The state accounted for 11.2% of total U.S. merchandise exports in the latest three months.
California’s export trade is highly diversified. Eleven major categories of goods each accounted for at least $1 billion in exports in the latest three-month period. Among the top ten categories, performance was variable in the latest quarter with only four categories showing growth.
On the plus side, topping the export list was Computer & Electronic Products, up 3.8% to $10.78 billion from $10.39 billion. Transportation Equipment exports rose 8.7% to $4.80 billon from $4.42 billion. Non-electrical Machinery exports increased 10.6% to $4.01 billion from $3.63 billion, and exports of Agricultural Products edged up 1.6% to $3.18 billion from $3.13 billion.
On the downside, exports of Miscellaneous Manufactured goods dropped by 4.7% to $4.16 billion from $4.37 billion. Chemical exports were off 5.9% to $3.36 billion from $3.58 billion. Exports of Food and Kindred Products fell 13.2% to $2.40 billion from $2.76 billion. Electrical Equipment exports slipped by 2.3% to $1.76 billion from $1.81 billion. Exports of Petroleum and Coal Products plummeted 32.1% to $1.20 billion from $1.77 billion. Fabricated Metal exports fell 4.8% to $1.05 billion from $1.10 billion. Finally, exports of Waste and Scrap were down 13.7% to $1.05 billion from $1.22 billion.
Mexico continued to rank as California’s single largest export destination during the latest three-month period, with the value of exports jumping 6.8% to $6.92 billion from $6.48 billion. Exports to Canada slipped by 4.4% to $4.30 billion from $4.50 billion, while shipments to China dropped by 11.9% to $3.85 billion from $4.37 billion. Exports to Japan also declined by 3.8% to $2.96 billion from $3.08 billion. South Korea, up 8.7% to $2.27 billion from $2.09 billion, rounded out California’s ‘Top Five’ national export destinations in the May-July quarter.
Regionally, California’s exports to the Asia Pacific region (including Australia and New Zealand) dropped 4.2% to $16.20 billion from $16.91 billion, a dip propelled largely by the fall-off in exports to China. California’s exports to the European Union slipped by 1.2% to $7.43 billion from $7.52 billion.
California’s exports to Latin America and the Caribbean (excluding Mexico) were down by 12.9% to $2.27 billion from $2.61 billion. California’s exports to South Asia (chiefly India and Pakistan) were off 1.7% to $1.38 billion from $1.41 billion. The state’s exports to Sub-Saharan Africa in the latest three months amounted to just $191 million, up 5.3% from $181 million during the same period twelve months earlier.
By mode of transportation, 46.7% of California’s $43.03 billion merchandise export trade in the latest three months was shipped by air, with Los Angeles International and San Francisco International Airports accounting for the vast majority of the state’s airborne trade. Seaports handled 29.1% of the state’s export trade, while 24.3% traveled by other modes, chiefly overland by truck or rail to Canada and Mexico.
The Outlook
Beacon Economics’ outlook for California’s merchandise export trade does not see a resumption of positive growth in the offing. We are not encouraged by recent developments in China where the promise of a burgeoning middle-class driving a growing import trade has not been borne out. Given the recent devaluation of the Chinese currency, we expect merchandise exports to China (the state’s third largest export market) to continue to decline through the balance of this year.
Exports to Canada (California’s second largest export destination) have been ebbing in recent months as the resource-rich country copes with a recession caused largely by the collapse in oil and gas prices. Aggravating the situation for California exporters is the fact that the Canadian dollar has continued to lose value against the U.S. dollar.
While Beacon Economics expects modest growth in California’s exports to Europe later in the year, the biggest gains are likely to be seen in the state’s exports to Mexico. As we have noted previously, a very sizable portion of California’s export trade with Mexico involves factories south of the border that export the vast majority of their output to the United States. In that way, California’s export trade with Mexico tends to rise or fall in tandem with economic activity here rather than in Mexico. That should bode well for California exporters in coming months.

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