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.
April 2, 2015 - California’s merchandise export trade was down nearly 9% in February over 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 merchandise export trade in February totaled $12.55 billion, 8.8% below the $13.76 billion recorded in February 2014. By way of comparison, overall U.S. exports of goods saw a 4.3% decline, while exports from Texas plunged by 10.3%.
“The dramatic nominal numbers we are seeing are largely a function of sharp changes in product prices, driven in turn by a decline in the cost of oil and an increase in the value of the U.S. dollar over the last few months,” said Christopher Thornberg, Founding Partner of Beacon Economics. “It makes it difficult to tell what is a real change in the goods being produced and sold abroad by California firms."
Exports of manufactured goods from California saw an 11.2% fall off from $9.02 billion to $8.02 billion. Exports of non-manufactured goods (chiefly agricultural produce and raw materials) took a much larger tumble, falling 15.9% from $1.87 billion in February 2014 to $1.57 billion. Re-exports meanwhile rose by 3.4% from $2.86 billion to $2.96 billion.
When adjusting for prices, a different picture emerges. Exports of agricultural products actually rose 12% over the year despite the drought. Petroleum products are also doing well despite issues with a number of the state’s refineries. On net, real exports fell as gains in these areas were offset by declines elsewhere—but the overall number isn’t as bad as the nominal headline would suggest.
“What we see in these numbers is evidence of the effects of a strong dollar, languid economic conditions throughout much of the world, and a logistical bottleneck at California’s major seaports,” said Jock O’Connell, Beacon Economics’ International Trade Adviser.
The good news is that the months-long dispute over a new longshore contract ended with a tentative accord between the International Longshore and Warehouse Union and the Pacific Maritime Association (which represents the terminal operators at the ports as well as the major steamship lines) on February 20. Since then, the Ports of Los Angeles, Long Beach, and Oakland have all been working to clear a backlog of containers. “We believe that some of the negative numbers for February will be reversed in March now that things are moving again,” said Thornberg.
Although California is now in the fourth year of drought, the overall impact on the state’s agricultural export trade remains muted. Shipments of agricultural produce in February were off just 4.2%, while exports of processed foods (including dairy products) fell by 22.9%.
While the media has devoted considerable attention in recent months to the plight of importers and exporters whose maritime shipments were being delayed or thwarted by logistical and labor issues at the state’s primary seaports, scarcely any mention was made of the fact that only about 20.1% of California’s $174.1 billion export trade last year was transported in the steel shipping containers that were the focus of so much concern. California exporters are more than twice as dependent on the state’s airports, which handled 44.1% of the state’s export trade last year (the balance was overland trade involving Canada and Mexico).
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., December 2014-February 2015) with the corresponding period one year earlier.
California's merchandise exports during the latest three-month period totaled $39.95 billion, a nominal decline of 3.1% from the $41.22 billion recorded during the same period twelve months earlier. The state accounted for 10.8% of total U.S. merchandise exports over the latest three months.
California’s export trade is highly diversified. Normally, eleven different major categories of goods have each accounted for at least $1 billion in exports during recent three month periods. However, the December-February period saw that number fall to nine, as exports of Fabricated Metal Products and Waste and Scrap fell below the billion dollar threshold.
Among the remaining categories, performance was variable, with only four categories showing growth.
Topping the export list in the latest three-month period was Computer & Electronic Products (up 3.8% from $10.19 billion to $10.58 billion). Transportation Equipment declined by 5.8% from $4.51 billion to $4.25 billion. Showing meager gains were Non-Electrical Machinery, up 0.1% from $3.67 billion to $3.68 billion and Miscellaneous Manufactured Commodities (a catchall category of merchandise ranging from medical equipment to sporting goods), up 0.2% from $3.12 billion to $3.13 billion.
Exports of Chemicals were off 1.0% from $3.23 billion to $3.20 billion. Electrical Equipment exports jumped by 10.5% from $1.44 billion to $1.59 billion.
Losses were apparent in Agricultural Products (down 7.4% from $3.37 billion to $312 billion) and Food and Kindred Products (down 19.8% from $2.63 billion to $2.11 billion). Petroleum and Coal Products exports declined by 10.94% from $2.00 billion to $1.78 billion.
Mexico continued to rank as California’s single largest export destination during the latest three-month period, with the value of exports increasing by 7.7% from $5.80 billion to $6.245 billion. Exports to Canada fell 8.5% from $4.55 billion to $4.16 billion, while shipments to China tumbled by 21% from $4.13 billion to $3.26 billion. Japan (up 1.7% from $2.98 billion to $3.03 billion) and South Korea (up 6.5% from $2.11 billion to $2.24 billion) rounded out California's ‘Top Five’ export destinations over the last three-month period for which statistics are available.
Regionally, California's exports to the Asia Pacific region (including Australia and New Zealand) dropped 5.2% from $15.95 billion to $15.12 billion, a dip propelled largely by a fall-off in exports directly to China. California’s exports to the EU were off by 2.74%, slipping from $6.98 billion to $6.79 billion. California exports to Latin America and the Caribbean (excluding Mexico) fell by 12.5% from $2.73 billion to $2.39 billion. The state’s exports to Sub-Saharan Africa amounted to just $150.6 million, down 19.4% from $187.0 million during the same period twelve months ago.
By mode of transportation, 46.9% of California’s $39.95 billion merchandise export trade in the last 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 30.5% of the state’s merchandise export trade, while the remaining 22.6% traveled overland by truck or rail to Canada and Mexico.
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