Mixed Results for California Exports in October
December 11, 2012
Weakening economic conditions in several key foreign markets and outright recessions in others led to mixed results for California exporters during October, according to an analysis by Beacon Economics of foreign trade data released this morning by the U.S. Commerce Department.
The value of goods shipped abroad by California businesses in October totaled $13.87 billion, a nominal increase of just 0.4% over the $13.81 billion recorded in the same month last year. Adjusting for inflation would translate that apparent gain into a real decline of 2.4%.
However, on a decidedly more positive note for California’s economy, exports of manufactured and non-manufactured goods were up in real as well as nominal terms, while re-exports of previously imported goods were down substantially.
“Despite adverse economic circumstances in much of the world, October saw real growth in exports of goods produced here in California,” said Jock O’Connell, Beacon Economics’ International Trade Adviser.
Indeed, the Port of Los Angeles had been reporting robust outbound numbers prior to this month’s dockside labor disruptions.
Jordan Levine, Beacon Economics’ Director of Economic Research said that although overall manufacturing employment was down 0.8% in the state in October, the figure masks the manufacturing uptick being experienced across California. “San Jose, Sacramento, Santa Rosa, Modesto, and Stockton all added more than 1,000 new manufacturing jobs over last October, showing that the industry is growing in key parts of the state,” said Levine.
California’s exports of manufactured goods totaled $8.93 billion, a nominal 4.2% gain over the $8.57 billion recorded last October. Non-manufactured exports (chiefly agricultural products and raw materials) rose by a nominal 7% from $1.85 billion to $1.98 billion. Meanwhile, re-exports fell by a nominal 12.7% from $3.39 billion to $2.96 billion.
“Even discounting for inflation, exporters of products of California-origin came out ahead in October,” O’Connell said. “Losses came only in the category of those previously imported goods which California businesses profitably re-sell to foreigners.”
On a year-to-date basis, California remains on track to eclipse the total value of last year’s export trade.
Because more detailed data on specific export commodities and their destinations can vary abruptly from month to month for a variety of factors, Beacon Economics’ analysis compares the latest three months with the corresponding period in the preceding year.
That analysis reveals that exports to Mexico and South Korea declined by 13.4% and 11.8%, respectively. More modest drops were evident in exports to China (-3.65%), Japan (-2.9%), and Canada (-2.1%). Gains were recorded in exports to the United Kingdom (2.3%), Australia (4.7%), Brazil (8.5%), France (16.2%), and Chile (34.1%).
There was a significant (17.7%) fall-off in exports of industrial equipment, including computers during the past three months that reflected a softness in the market for personal computers in the face of rising tablet sales. However, the data also show notable gains in exports of fruits and nuts (10.2%), pharmaceutical products (10.2%), and aircraft and aerospace equipment (22.1%).
On a seasonally-adjusted basis, October’s export trade represented a 7.7% increase over September.
“That is a very positive indicator,” O’Connell said.
Looking ahead, one immediate certainty is that November’s export statistics will reflect the effects of the labor strike, which hobbled operations at the Ports of Los Angeles and Long Beach during the last four days of the month. However, with the exception of some perishable cargoes, the delayed shipments will show up in December’s export figures.
Otherwise, the outlook for the winter months is increasingly ambiguous.
Just last Thursday, the European Central Bank sharply reduced its growth forecast for the 17 euro zone countries to 0.3%. Central Bank president Mario Draghi also warned that the euro zone economy could end up shrinking 0.9% next year.
Despite Europe’s tribulations, however, California exports to both the euro zone and the larger European Union increased by around 3% in October over one year earlier.
The latest forecast from the Organization for Economic Co-operation and Development projects Canada’s economy will grow by 1.5% in the final three months of this year, and advance only 1.8% in 2013. That projection is half a point below the Bank of Canada’s official forecast. Canada accounts for nearly 11% of California’s export trade.
The outlook is more optimistic south of the border where the new Mexican government is forecasting a gross domestic product growth of 3.5% in 2013. Mexico is benefiting from a surge in foreign direct investment, especially in the automotive sector. Although Mexico remains California’s leading export market, California shipments to Mexico have been declining sharply in recent months primarily because of a shrinking demand for personal computers.
Across the Pacific, indications are that China’s economy is once again on an upward swing. China, together with Hong Kong and Macao, currently accounts for 13.4% of California’s merchandise export trade.
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