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.
February 5, 2015 - Overcoming a strengthening dollar, slackening demand from economically stressed trading partners, and congestion at major West Coast seaports, California’s exporters set a new all-time high in 2014, 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 last year totaled $174.13 billion, a nominal 3.6% increase over 2013. Even when adjusted for inflation, the totals for 2014 exceeded pre-recession levels.
Manufactured exports in 2014 gained a nominal 3.0%, rising to $112.50 billion, while non-manufactured exports (chiefly agricultural products and raw materials) rose 5.0% to $22.69 billion. Re-exports gained 4.5% to $38.94 billion. Additionally, gains in the export and production of manufactured goods have finally translated into new manufacturing jobs in California. "Since hitting bottom in mid-2010, the state has added 23,000 manufacturing jobs––primarily in durable goods manufacturing," said Beacon Economics' Director of Economic Research Jordan Levine. "While this is positive news it's important to remember that although we have started adding these jobs, it is still an area in which we critically lag the rest of the nation, where there is a much stronger manufacturing renaissance."
And unfortunately, the record-making news masked a less encouraging picture as the year ended.
December exports totaled $14.73 billion, a nominal increase of just 0.9% over the $14.60 billion in exports recorded in December 2013. In real dollar terms, that apparent gain actually represents a 0.7% decline.
Exports of manufactured goods in December saw a nominal 0.3% drop from $9.58 billion to $9.54 billion. Exports of non-manufactured goods took a larger tumble, falling 5.5% from $1.92 billion in December 2013 to $1.81 billion. Re-exports meanwhile rose by 8.7% from $3.11 billion to $3.37 billion.
Beacon Economics attributed December’s weak export performance to a dollar which had been growing steadily stronger since last spring, feeble economic growth through much of the world, and logistical bottlenecks at the state’s major seaports.
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., October-December) with the corresponding period one year earlier.
California's merchandise exports during the last quarter of 2014 totaled $45.14 billion, a nominal gain of 0.23% over the $45.05 billion recorded during the same period in 2013. The state accounted for 10.7% of total U.S. merchandise exports over the latest three months.
California’s export trade is highly diversified, with eleven different major categories of goods each accounting for at least $1 billion in exports during the latest three month period.
Performance, however, was highly variable, with six categories showing declines in exports from the same period last year. Topping the export list in last year’s fourth quarter period was Computer & Electronic Products (up 2.1% from $11.33 billion to $11.60 billion); Transportation Equipment (down 5.3% from $5.04 billion to $4.77 billion); Agricultural Products (down 8.9% from $4.70 billion to $4.29 billion); Non-Electrical Machinery (down 1.8%% from $4.01 billion to $3.93 billion); Chemicals (up 2.9% from $3.37 billion to $3.47 billion).
Exports of Miscellaneous Manufactured Commodities (a catchall category of merchandise ranging from medical equipment to sporting goods) were up 4.6% from $3.28 billion to $3.43 billion, while Food and Kindred Products fell 12.0% from $2.78 billion to $2.45 billion. Exports of Petroleum and Coal Products, which had been increasing briskly over the past three years, rose by 7.7% from $1.96 billion to $2.11 billion. Electrical Equipment also looked especially robust with a 32.6% leap from $1.33 billion to $1.76 billion. Exports of Scrap and Waste fell 13.8% from $1.29 billion to $1.11 billion, while exports of Fabricated Metal Products dropped 9.2% from $1.12 billion to $1.02 billion.
Mexico maintained its status as the state’s single largest export destination during the latest three-month period, with the value of exports increasing by 9.9% from $6.20 billion to $6.82 billion. Exports to Canada dropped 9.7% from $5.34 billion to $4.82 billion, while shipments to China tumbled by 13.8% from $4.55 billion to $ 3.92 billion. Japan (down 5.2% % from $3.26 billion to $3.09 billion) and South Korea (up 2.4% from $2.28 billion to $2.34 billion) rounded out California's ‘Top Five’ export destinations in the final quarter of 2014.
Regionally, California's exports to the Asia Pacific region (including Australia and New Zealand) dropped 3.0% from $17.79 billion to $17.25 billion. Remarkably, considering the ongoing economic travails of the European Union, California’s exports to the EU edged higher by 1.7% from $7.42 billion to $7.54 billion. California exports to Latin America and the Caribbean (excluding Mexico) rose by 1.8% from $2.77 billion to $2.82 billion. The state’s exports to Sub-Saharan Africa amounted to only $182.1 million, down 13.4% from $210.3 million during the same period in 2013.
By mode of transportation, 42.5% of California’s $45.14 billion merchandise export trade in the last quarter of 2014 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 33.6% of the state’s export trade, while the remaining 24% traveled overland by truck or rail to Canada and Mexico.
Califorinia Exports: The Near Term Outlook
Beacon Economics sees little reason to be sanguine about near-term improvements in the state’s merchandise export trade. The figures for January, which will be published on March 6, will likely show a further deterioration. Even if their economies were performing better, foreign business and consumers saw a strong dollar grow even stronger in January, making U.S. goods and services more expensive. Labor strife at the state’s seaport worsened in January and may have stymied or discouraged some exporters from shipping goods abroad. Finally, as the drought continues, expect to see declines in agricultural production affect food exports.
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