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California's Export Trade Industry Falters As Manufactured Goods Slip

September 4, 2014 - After a sixteen-month stretch of steady and often strong growth, California’s export trade faltered in July, 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 July totaled $13.85 billion, down a nominal 0.7% from the $13.95 billion in exports recorded in July 2013.

The fall-off was entirely due to a drop in the state’s exports of manufactured goods, which slipped by 4.1% from $9.41 billion in July of last year to $9.03 billion this July.

That decline was partially offset by a 13.4% jump in California’s exports of non-manufactured goods (chiefly agricultural produce and raw materials) from $1.64 billion in July 2013 to $1.69 billion this July. Re-exports meanwhile edged up 1.9% from $3.07 billion to $3.13 billion.
 


California’s disappointing showing in July was in contrast to the solid 4.7% increase in overall U.S. merchandise exports. “July saw a nearly uniform decline in California’s leading manufactured exports, including a full one-third drop in exports of Petroleum and Coal Products,” said Jock O’Connell, Beacon Economics’ International Trade Advisor

The likely culprit, according to O’Connell, is exporters’ fear that West Coast seaports would shut down once the contract between the International Longshore and Warehouse Union and the Pacific Maritime Association expired on June 30.

“Shipments that might have departed in July went out in June,” O’Connell said. "There's not much more to the story than that."


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 latest May-July period totaled $43.85 billion, a nominal increase of 3.3% over the $42.45 billion recorded during the same period a year earlier. “The overall U.S. export market has slowed in recent months," said Christopher Thornberg, Beacon Economics’ Founding Partner. “Nationally, exports are only 4% higher than they were last year, largely due to the slowing of the global trade”

The state accounted for 10.7% of total U.S. merchandise exports over the past three months.

California's export trade is highly diversified, with eleven different 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 period last year.

Topping the export list in this year’s May-July period was Computer & Electronic Products (down 1.4% to $10.39 billion); Transportation Equipment (down 1.8% to $4.42 billion); and Miscellaneous Manufactured Commodities (a catchall category of merchandise ranging from medical equipment to sporting goods), with $4.37 billion in exports, down 2.7% from the same period one year earlier.

On the positive side, strong growth were recorded for Chemicals (+6.0%); Agricultural Products (+6.0%); and Food and Kindred Products (+9.2%).

Mexico remained California's single largest export market during the latest three-month period, with the value of exports advancing by 6.7% to $6.47 billion. Exports to Canada fell by 4.8% to $4.48 billion, while shipments to China rose by just 1.9% to $4.35 billion. Japan (down 2.6% to $3.11 billion) and Hong Kong ($2.31 billion, up 30.3%) rounded out California's ‘Top Five’ export destinations in the May-July period.

Regionally, California's exports to the Asia Pacific region (including Australia and New Zealand) rose by 3.0% to $16.97 billion. Exports to the European Union grew by 4.1% to $7.53 billion. California exports to Latin America and the Caribbean (excluding Mexico) rose by 10.8% to $2.62 billion. The state’s exports to Sub-Saharan Africa amounted to only $182.2 million, down 26.9% from the same May-July period last year.

By mode of transportation, 46.1% of California’s $43.85 billion merchandise export trade in the most recent three-month period 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 31.0% of the state’s export trade, while the remaining 22.9% of the state’s exports of goods traveled overland by truck or rail to Canada and Mexico.

Year-to-date, California’s merchandise export trade ($99.99 billion) represented a 5.4% gain over the same period last year. 


California Exports: The Near Term Outlook

Beacon Economics expects California’s export trade to continue expanding over the next several months, albeit at a slow pace. “The United States is still competitive, with a weak dollar and a manufacturing sector that emerged from the last downturn leaner and meaner—unfortunately the rest of the world has not kept its part of the bargain,” said Thornberg.

Economic growth in China has been slowing, Japan’s recovery effort has been stunted, Europe has slipped into neutral, and Mexico along with much of the developing world has essentially flat-lined, according to O’Connell. “Ironically, perhaps, Barrack Obama’s America and David Cameron’s Britain are now the world’s growth economies,” he said.




 

Beacon Economics is a leading provider of economic and data analysis. Our research informs the financial and economic strategies of major hedge funds, industry, cities and counties, government agencies, and nonprofit organizations.

For more information, please view our research and analytics page or contact Managing Partner Sherif Hanna at 310-571-3399 or Sherif@BeaconEcon.com.

 
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