California Export Trade Surges
August 9, 2012 – LOS ANGELES, CALIFORNIA – Despite battling a strong dollar and weak economic conditions worldwide, California’s exporters still managed to post impressive gains in June, according to an analysis by Beacon Economics of foreign trade data released yesterday by the U.S. Commerce Department.
The value of goods shipped abroad by California businesses in June totaled $15.18 billion, a nominal increase of 9.7% over the $13.83 billion recorded in June 2011. By comparison, overall U.S. merchandise exports were up by only 8.0% over the same period. While exports to some economies – such as Asia and Europe – have flattened, other important trading partners such as Mexico have moved in to fill the gap.
“With the health of most foreign markets in doubt, June’s numbers continue to demonstrate the resilience of California’s export industries, especially in our hi-tech manufacturing sector,” said Jock O’Connell, Beacon Economics’ International Trade Adviser.
The state’s exports of manufactured goods jumped by 10.7% to $9.71 billion from $8.78 billion last June. Non-manufactured exports (chiefly raw materials and agricultural products) declined by 4.1% to $1.58 billion from $1.65 billion, while re-exports rose by 14.0% to $3.89 billion from $3.41 billion.
For the first half of 2012, Beacon Economics’ reports that California’s merchandise export trade is running about 5% ahead of the inflation-adjusted pace set in 2008, the peak pre-recession year for the state’s exports. This success story may have something to do with the impressive employment numbers being posted in the state. “Over the last few months California has been responsible for close to half of the national job growth,” says Christopher Thornberg, Founding Partner of Beacon Economics. “Some of this can be attributed to improving local demand for goods, but much of it is clearly due to continued growth in international demand for goods and services produced here.”
However, Beacon Economics warns that the next few months are apt to feature a combination of strong headwinds and a reduced pace of export growth. With the dollar currently trading about 12% over its value last summer, U.S. exports are accordingly more expensive in global markets.
At the same time, the European Union’s lingering malaise has been affecting export-oriented economies in Asia and Latin America that had come to rely on European demand for imported goods. Major developing economies like India and Brazil have been stumbling lately, in part because fast-paced growth overwhelmed the capacity of their respective infrastructures. Even China has been seeing a slowdown in its normally torrid economic growth rate as it enters a period of political transition that seems unusually fraught with uncertainty.
There is some good international news. Mexico remains California’s largest and most vibrant foreign market, with the value of the state’s exports to its southern neighbor up nearly 25% over last year – and there is little sign of slowing growth. The same applies to another important U.S. trading partner, Canada. Moreover, California’s Agricultural sector is likely to remain a strong point. The droughts impacting the midwest will likely push up food prices globally, benefiting state agricultural producers.