Tennessee Trade Report 3rd Quarter 2017

Tables and Graphs

Exports and Changing Markets

Tennessee's Largest Markets

The state made solid export gains for the third quarter in a row, but growth was reliant on relatively few industries.

Tennessee exports rose to $8.3 billion in the third quarter, an increase of 6.55 percent from a year ago. That compares quite favorably with the 5.2 percent growth in total U.S. exports for the quarter. It's the third quarter in a row that state exporters made solid gains over their 2016 performance.

That said, the state was reliant on relatively few industries for this strong performance. Aircraft-related exports accounted for well more than a third of the gains. Thanks to big sales in such disparate markets as Mexico, Thailand, Costa Rica, and France, the aircraft sector's exports grew to $477 million in the third quarter, compared to $296 million in 2016's third quarter. No other industry could come close to that performance. However, strong growth occurred in the computer industry, chemicals (despite a drop in polyamides exports), orthopedics, and silicon as well. It was also a good quarter for the state's heavy machinery exporters, with foreign sales of bulldozers and road graders more than doubling (from $27 million to $61 million).

The story was more complicated for the state's largest export sector, automobiles. Growth in car and SUV sales from $640 million to $681 million was outweighed by large declines in shipments of auto parts (off $66 million), automotive engines (down $85 million) and a variety of specific engine accessories such as radiators. Sales of aluminum plating, much of which is eventually a body part, were down as well (by $37 million). On net, the entire industry was down quite a bit. Sales of medical instruments, usually the state's single largest exported good, were also down, falling $50 million to $641 million. Fortunately, few other sectors suffered declines of this magnitude. However, when two of Tennessee's top export industries struggle, it creates a pretty significant headwind!

State exports were up almost everywhere in the world, supporting the view that the global economy is in a rare situation of near universal growth across geographies. The major exception to this was the Middle East. Large declines in auto shipments to Saudi Arabia and the United Arab Emirates meant that total Tennessee exports to the region fell $50 million, a 20 percent loss. A decline in car sales produced a similar albeit much smaller decline in Australia, too.

In sheer dollar terms, the largest gains were in the euro market. State exports there were up $114 million, to $1.151 billion. The Netherlands was the best performing of the euro countries, posting a more than 20 percent increase thanks to increases in filament tow, chemicals, and medical instruments. France (thanks to the aircraft sector) and Italy also bought significantly more Tennessee products than they did a year earlier.

In percentage terms, Central America was the surprising leader. Exports to these small countries grew by more than 70 percent, to $170 million. The Costa Rican aircraft purchase was the heart of this gain, but there were also sizable increases in kraft paper and cotton sales to these countries.

Elsewhere, state exporters saw significant gains in East Asia and the NAFTA market, along with smaller increases in Southeast Asia and South America. Hybrid cars, laptops, and cotton powered a 14 percent gain in China; car parts, orthopedics, and medical instruments led the way to a 17 percent gain in Japan; and kraft paper and silicon spearheaded a 19 percent increase in South Korea. The entire region accounted for one-fifth of all Tennessee exports for the quarter. In NAFTA, exports to Canada grew by $50 million (to $2.167 billion), thanks to a large increase in automobile shipments, while exports to Mexico grew by a larger $85 million (to $1.17 billion) again primarily due to those aircraft sector exports. It is interesting to note that Mexico purchased over $9 million in canned milk from Tennessee exporters (the product first shipped to Mexico this past June). Gains to Southeast Asia and South America were smaller ($28 million and $29 million, respectively), but they complete the picture of state export increases almost across the globe.

In sum, it was a rather good quarter for state exports, with the only worry being the narrowness of the gains. But right now the trajectory of strong economic growth across much of the world suggests that Tennessee exports should fare well in the coming months.