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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.

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California Exporters Continue Strong Run

June 5, 2017 - California’s exporters maintained their strong performance in 2017 by posting impressive gains in April. According to a Beacon Economics’ analysis of U.S. trade statistics released this morning by the U.S. Census Bureau, foreign shipments by California businesses totaled $14.07 billion for the month, a 9.6% increase over the $12.84 billion recorded in April 2016. Through the first four months of 2017, the state’s export trade is running 9.9% ahead of last year.

“Foreign demand for California products was especially exuberant in April as shipments of nearly every major export commodity showed solid gains,” said Jock O’Connell, Beacon Economics’ International Trade Advisor.

The state’s exports of manufactured goods in April rose by 8.2% to $9.12 billion from $8.43 billion one year earlier. Exports of non-manufactured goods (chiefly agricultural products and raw materials) jumped by 17.9% to $1.69 billion from $1.43 billion. Re-exports, meanwhile, grew by 9.6% to $3.26 billion from $2.97 billion.

By way of comparison, the nominal value of overall U.S. merchandise exports in April moved up by 6.3%. 

“As expected, our export numbers improved over last year’s, partly because of the improved performance of our trading partners and also because of a somewhat weaker dollar so far this year,” said Robert Kleinhenz, Executive Director of Research at Beacon Economics. “On the other hand, with sustained strength in the California and U.S. economies, we expect to see continued increases in imports.”

California accounted for 11.1 % of the nation’s overall merchandise export trade. The gains were reflected in the increased volume of outbound traffic at the state’s principal international trade gateways. Airborne export tonnage from LAX and SFO was up 13.3% from last April, while the number of outbound loaded containers sailing from the Ports of Los Angeles, Long Beach, and Oakland rose by 4.8% over April 2016.

California Imports Rise

The U.S. Department of Commerce has determined that California was the state-of-destination for 18.2% of all U.S. merchandise imports in April, with a value of $34.71 billion, 10.8% higher than the $31.33 billion in imported goods in April 2016. Manufactured imports totaled $31.03 billion, up 8.7% from $28.55 billion last year. Non-manufactured imports in April were valued at $3.68 billion, fully 32.6% higher than the $2.78 billion recorded one year earlier.

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 can 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., February-April) with the corresponding period one year earlier.

California's merchandise exports during the latest three-month period totaled $42.44 billion, a nominal gain of 9.7% from the $38.68 billion in the same months last year.

Eight of the ten leading categories of exports saw increases. On the plus side, the list was topped by shipments of Computer & Electronic Products (computers and peripherals; communication, audio, and video equipment; navigational controls; and electro-medical instruments), which grew by 3.6% to $10.56 billion from $10.19 billion.

The state’s exports of Transportation Equipment (automobiles, trucks, trains, boats, airplanes, and their parts) leapt by 21.8% to $5.02 billion from $4.12 billion. Exports of Non-Electrical Machinery (machinery for industrial, agricultural and construction uses as well as ventilation, heating, and air conditioning equipment) likewise soared by 20.5% to $4.24 billion from $3.52 billion.

Agricultural exports were up 7.7% to $3.20 billion from $2.97 billion, while foreign shipments of Food & Kindred goods rose 4.3% to $2.15 billion from $2.06 billion.

Exports of Electrical Equipment and Appliances nudged up 9.2% to $1.79 billion from $1.64 billion, while exports of Primary Metal Manufacturing products jumped 145.1% to $1.64 billion from $683 million. Exports of Fabricated Metal Products rose by 6.5% to $1.07 billion from $1.01 billion. Exports of Petroleum and Coal Products were valued at $981 million, up 19.9% from $819 million in the same period one year earlier.

Trending lower were exports of Miscellaneous Manufactured Commodities (a catchall category of merchandise ranging from medical equipment to sporting goods) slipped lower by 5.0% to $3.36 billion from $3.54 billion. Chemical exports (including pesticides and fertilizers; pharmaceutical products; paints and adhesives; soap and cleaning products; and raw plastics, resins, and rubber) also declined, falling 3.3% to $3.32 billion from $3.43 billion. 

Mexico remained California’s most important export destination during the last three months, despite anxieties over the future of NAFTA. Shipments south of the border edged up 2.2% to $6.20 billion from $6.07 billion. Exports to China jumped 20.2% to $4.04 billion from $3.59 billion. In third place was Canada, which took in $3.87 billion in California exports, off 0.7% from $3.89 billion last year. In fourth place was Hong Kong, which saw its imports from California soar by 93.4% to $3.51 billion from $1.87 billion. Japan ranked fifth, importing $3.41 billion in goods from California, up by 19.9% from $2.85 billion a year earlier. South Korea, up 22.5% to $2.48 billion from $2.03 billion, rounded out the list of foreign markets importing at least $2 billion in merchandise from California during the past three months.

The state’s export trade with the economies of East Asia leapt by 25.1% to $16.63 billion from $13.30 billion. By comparison, California’s exports to the European Union moved up by 7.0% to $7.97 billion from $7.45 billion. Mexico and Canada, America’s partners in the North American Free Trade Area, accounted for 23.7% of California’s merchandise export trade in the latest three-month period. Exports to our two neighbors nudged up a combined 1.1% to $10.07 billion from $9.86 billion one year earlier.

By mode of transport, 49.7% of the state’s $42.44 billion merchandise export trade during the most recent three months went by air, while waterborne transport carried 28.4% of the outbound trade. The balance traveled overland to Canada and Mexico.

The Outlook

Economic abroad continue to look favorable for California exporters. China’s economy is expanding, and growth prospects in much of Europe are improving. And, although the process of renegotiating the terms of the North American Free Trade Agreement are formally underway, there appears little reason to expect that U.S. trade with Mexico and Canada will be disrupted, at least in the short-term.

For California and other states whose industries are closely linked to the economies of the Far East, the main concern right now lies with the security threat posed by North Korea and the danger it presents to transpacific trade. For the time being, President Trump has been soft-pedaling his customary complaints about America’s trade deficit with China in the hope that Chinese President Xi will rein in the belligerence of Kim Jong-un’s regime in Pyongyang. If there is insufficient progress on that front, Trump may retreat to the hardline position he embraced toward China during last year’s election campaign, which could have a chilling effect on transpacific trade.


Note: The U.S. Commerce Department has been publishing state-of-destination import statistics since 2008. Beacon Economics has long felt that state import data provide a highly misleading indication of the state in which imported goods were ultimately consumed. As a major gateway for the nation’s foreign trade, California has consistently been credited with an out-sized share of U.S. merchandise imports. However, we now believe that the process by which state-of-destination import statistics are compiled has become stable enough to be used to measure relative increases or decreases in the value of imported goods consumed or otherwise used by residents or businesses located in California. We emphasize that we are primarily interested in determining trends. We continue to think it highly inadvisable to combine state export and import statistics to calculate a state trade balance.

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