California’s exporters solidified a strong first quarter with impressive gains in March, according to a recent Beacon Economics trade report.
According to Beacon Economics’ analysis of U.S. trade statistics released May 4 by the U.S. Census Bureau, foreign shipments by the state’s businesses totaled $14.91 billion for the month, an 8.4% increase over the $13.75 billion recorded in March 2016.
The state’s exports of manufactured goods in March rose by 10.7% to $9.91 billion from $8.95 billion one year earlier. Exports of nonmanufactured goods (chiefly agricultural products and raw materials) increased by 20.0% to $1.74 billion from $1.45 billion. Re-exports, meanwhile, dipped by 2.4% to $3.27 billion from $3.35 billion.
By way of comparison, the nominal value of overall U.S. merchandise exports in March rose 8.1%. California accounted for 10.99% of the nation’s overall merchandise export trade.
California’s 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 12.0% from last March, while the number of outbound loaded containers sailing from the Ports of Los Angeles, Long Beach, and Oakland rose by 7.6% over March 2016.
Quarterly figures smooth out variations in the data, especially in the first quarter of the year when the timing of the Chinese Lunar New Year affects the monthly figures. During the first quarter, seasonally adjusted California exports rose by 2.8% over the fourth quarter of last year.
California Imports Rise
The U.S. Department of Commerce has determined that California was the state-of-destination for 18.1% of all U.S. merchandise imports in March, with a value of $34.88 billion, 9.7% higher than the $31.81 billion in imported goods in March 2016. Manufactured imports totaled $30.95 billion, up 6.2% from $29.13 billion last year. Non-manufactured imports in March were valued at $3.92 billion, 37.3% higher than the $2.68 billion recorded one year earlier.
“The strength of the California economy generates income growth and expansion of business activity in the state, fueling the appetite for imports,” said Robert Kleinhenz, executive director of research at Beacon Economics. “In that sense, increases in imports are an indirect reflection of the strength of state’s economy as Californians have the wherewithal to buy things that are made in the U.S. as well as in other countries.”
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 (January–March) with the corresponding period one year earlier.
California’s merchandise exports during the latest three-month period totaled $41.65 billion, a nominal gain of 10.1% from the $37.84 billion in the first quarter of last year. Eight of the 10 leading categories of exports saw increases. On the plus side, the top export category of Computer & Electronic Products (computers and peripherals; communication, audio, and video equipment; navigational controls; and electro-medical instruments) grew by 5.6% to $10.31 billion from $9.76 billion.
The state’s exports of Transportation Equipment (automobiles, trucks, trains, boats, airplanes, and their parts) leapt by 17.2% to $4.88 billion from $4.16 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 26.4% to $4.23 billion from $3.35 billion.
Agricultural exports were up 6.7 % to $3.07 billion from $2.88 billion, while foreign shipments of Food & Kindred goods rose 5.9% to $2.10 billion from $1.98 billion. Exports of Electrical Equipment and Appliances increased 6.9% to $1.78 billion from $1.66 billion, while exports of Primary Metal Manufacturing products were 72.9% higher, rising to $1.90 billion from $1.10 billion. Exports of Petroleum and Coal Products were valued at $1.04 billion in the first quarter, up 21.0% from $861 million in the same period one year earlier.
On the downside, exports of Miscellaneous Manufactured Commodities (a catchall category of merchandise ranging from medical equipment to sporting goods) slipped lower by 1.2% to $3.26 billion from $3.29 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 6.4% to $3.10 billion from $3.31 billion.
Mexico remained California’s most important export destination during the latest three months, despite sharp gyrations in the value of the peso. Shipments south of the border rose 4.2% to $6.27 billion from $6.01 billion. Exports to China jumped 18.4% to $3.84 billion from $3.24 billion. In third place was Hong Kong, which took $3.68 billion in California exports, roaring up by 68.6% from the first quarter of last year. Canada (until recently California’s second leading export destination) ranked fourth with $3.67 billion in exports, off by 2.2% from $3.76 billion one year earlier. Japan, up 12.5% to $3.01 billion from $2.67 billion, rounded out the list of California’s top five export markets during the first quarter of 2017.
The state’s export trade with the economies of East Asia jumped 21.3% to $16.04 billion from $13.22 billion. By comparison, California’s exports to the European Union moved up by 6.3% to $7.89 billion from $7.42 billion.
Mexico and Canada, the United States’ partners in the North American Free Trade Agreement (NAFTA, accounted for 23.9% of California’s merchandise export trade in the latest three-month period. Exports to the nation’s two neighbors rose a combined 1.7% to $9.94 billion from $9.77 one year earlier. By mode of transport, 49.2% of the state’s $41.65 billion merchandise export trade during the most recent three-month period went by air, while waterborne transport carried 29.3%. The balance travelled overland to Canada and Mexico.
Outlook
Economic conditions abroad are looking increasingly favorable for California exporters, although concerns about the future of NAFTA have sent the currencies of both Mexico and Canada—two of California’s top export markets—tumbling against the dollar.
A mid-April update to the International Monetary Fund’s global economic outlook expects global trade volumes to expand 3.8% this year after growing just 2.2% last year. Developing nations were predicted to expand at a 4.5% clip this year, a marked improvement from the 4.1% growth in 2016.
Despite a litany of challenges, the European Union’s outlook is also brighter. And China’s economy reportedly grew by 6.9% in the first quarter, its highest quarterly growth pace in two years. Even more encouraging for California, recent data show Chinese imports increasing 20%.
Beacon Economics experts remain concerned about President Trump’s periodic gyrations regarding U.S. trade policy and foreign relations in general. Per Beacon, they were relieved by the moderate tone of the draft agenda for renegotiating NAFTA that the White House submitted to Congress in March. But the President’s lack of clarity regarding the future direction of trade policy in general, and NAFTA in particular, mainly contribute to greater uncertainty about the economy and the international trade situation.
Staff Contact: Susanne T. Stirling
