Welcome to the California Trade Report, Beacon Economics’ monthly analysis of California’s international trade activity. This report analyzes data released by the U.S. Census Bureau’s Foreign Trade Division and pinpoints important trends in the state’s import/export industry, identifying potential effects on the state’s economy. The report is only a sampling of the kind of economic research and data analysis available from Beacon Economics.
October 6, 2015 - The value of California’s merchandise export trade in August plummeted from the same month last year, 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 August totaled $13.24 billion, down 9% from the $14.55 billion recorded in August 2014. By way of comparison, overall U.S. merchandise exports fell by 10.4% over the same period, while exports from Texas shrank by nearly one-fifth (19.1%).
"The numbers look worse than they actually are due to the rapid appreciation of the U.S. dollar over the past year along with globally declining commodity prices," said Beacon Economics' Founding Partner Christopher Thornberg. According to the U.S. Bureau of Labor Statistics, the price of U.S. exports has fallen about 7% over the last year, explaining most of the drop in nominal exports. "This implies that real exports are only modestly off the mark, a relief for workers but not so much for companies' bottom lines,"’said Thornberg.
California's exports of manufactured goods in August dropped by 9.8% to $8.66 billion from $9.60 billion last year. Exports of non-manufactured goods (chiefly agricultural produce and raw materials) tumbled by 15.1% to $1.48 billion from $1.75 billion the previous August. Re-exports meanwhile dropped by 3.2% to $3.09 billion from $3.20 billion.
“With all of our principal trading partners plagued by sluggish economic growth, August’s export numbers were discouraging but hardly surprising,” said Jock O’Connell, Beacon Economics’ International Trade Adviser.
California’s export trade so far this year is lagging behind last year’s pace by 3.2%.
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., June - August) with the corresponding period one year earlier. That analysis shows that California’s merchandise exports totaled $42.14 billion, down 4.4% over the same time period last year.
Exports of petroleum and coal products led the decline, exacerbated by low oil prices and record high global supplies. Shipments of these products totaled $1.03 billion during the latest three-month period, down 40.4% from the same time one year prior. Food product and chemical exports also posted large declines and totaled $2.30 billion and $3.37 billion, down 12.2% and 8.2%, respectively.
On the plus side, exports of non-electrical machinery, the third largest category by dollar value, posted solid gains. Non-electrical machinery totaled $4.02 billion during the June-August period, a 9.8% year-over-year increase. These gains were due to strong shipments of industrial machinery to Asia. Industrial machinery exports to China, Taiwan, and Japan were each more than $100 million higher than during the same time period last year.
Unfortunately the increase in non-electrical machinery exports was unable to offset the declines elsewhere. Eight of the top ten export categories were lower during the latest three-month period compared to last year. Agricultural product exports were the only other category to increase year-over-year, but only by 0.6%.
Shipments to China, the third largest export destination for the state, were the main drag on overall trade growth during the June-August period. Exports to China totaled $3.91 billion, a 10.3% decrease from the same time period last year. The decline is primarily due to a 41.9% drop in transportation equipment exports.
Shipments to Canada, California’s number two export destination, were also down. Exports there totaled $4.28 billion, down 6.4%. Mexico remained the number one export market as shipments there were 2.9% higher.
Looking ahead, Beacon Economics does see some signs of stabilization. "With Europe improving, we expect the U.S. dollar to begin stabilizing, and with it exports; but we don't see much in the way of real export growth for the nation until the Chinese economy stabilizes," said Thornberg. "The good news is that the drag on the U.S. economy being created by slowing trade will be offset at some level by the domestic stimulating effects of lower commodity prices. That said, we have not adjusted our outlook for growth in the U.S. economy."
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