Tennessee Trade Report 1st Quarter 2016

Tennessee exporters eked out a 0.66 percent gain over last year’s first quarter.  This modest increase however (from $7.78 billion to $7.83 billion) was the tenth best among all American states, showing us how difficult the export environment is right now.  Overall American exports fell almost 7% for the quarter.

The Slowdown of Growth in the Emerging Market Countries Hurt State Exporters

The state faced the same basic problem as the rest of the country: the sizable slowdown of emerging market economies.  Tennessee experienced sizable losses in South America and the Middle East, while Southeast Asia was a wash.  Gains to the developing world were pretty much limited to China, where exports grew 8% despite of large decline in cotton shipments, Hong Kong, Saudi Arabia (because of a very large increase in auto sales), and Singapore. Smaller gains were made in Turkey and India. Shipments within North America were also flat, with those going north of the border almost unchanged from 2015 and those to Mexico up but $6 million (to $1.121 billion).  That doesn’t mean there weren’t some shifts in the NAFTA-area shipments.  Computer and automotive products gained substantially in Canada versus declines in lawn mower and medical instruments sales while Mexico saw large increases in automotive shipments (though a big drop in diesel engines) and cell phone equipment against declines in computers and kraft paper.  Japan too was off.  Exports to Japan fell 9 percent (to $407 million).  This was despite a big increase in electric storage battery parts, the star industry for the quarter. The fall was largely due to declines in various auto part shipments.

...But Gains in Europe Helped

The state’s ability to make any export gains, then, basically resulted from solid performances in Europe.  Exports to the Eurozone grew from $968 million to $1.129 billion, while Britain added another $40 million. For the Eurozone, the medical industry produced most of these additional exports. Its exports increased by almost $100 million from a year ago, a rather remarkable 41%.  The story in the UK was again electric storage battery parts, shipments of which soared from virtually 0 to $47 million.

Medical Instruments, Automobiles, Cell Phone Equipment and Electric Batteries were all Strong

Sectorally, the strongest industries were medical instruments (closing in on accounting for 10% of the value of all Tennessee exports), automobiles, cellular phone equipment, and those electric storage batteries and parts. As noted, the medical sector’s largest gains were in Europe though China and Singapore also kicked in.  Most of the increased auto exports were to the Middle East, specifically Saudi Arabia. The gains in cellular phones and equipment were posted in Mexico and Hong Kong.

Cotton Exports Fell Substantially

A number of industries, though, had a tougher quarter. Cotton did especially poorly, losing nearly $72 in exports. Losses were concentrated in China, Viet Nam, and Indonesia. Iron and steel products, which mostly go into automobiles but include a wide range of items from screws and bolts on up, lost some $45 million, almost one-quarter of its exports.  Plastics and computer industry shipments both fell to about $435 million, a $30 million drop for each. Other goods that suffered a difficult quarter included coloring matter and lawn mowers.  In both latter cases, the losses were widely distributed globally.

It was a "Good News, Bad News Quarter"

In sum, it really was a good news/bad news quarter.  While it is difficult to get excited about a small export gain, Tennessee was still able to turn in positive numbers when so many other states could not. The stop in the fall of exports to Canada, which had been the most serious issue for the state over the past several quarters, also must count as good news. Until solid growth returns to the emerging market regions it’s probably too much to expect greatly improved export numbers over the next several quarters. That said, the state’s ability to forge ahead in China and Europe while at least holding its own in the NAFTA market give some promise that Tennessee exporters can continue to produce solid numbers in what is now a very challenging global environment.