Tennessee Trade Report 2nd Quarter 2017

Tables and Graphs

Exports and Changing Markets

Tennessee's Largest Markets

It was the best quarter for the state's exporters since the second quarter of 2015.

Tennessee exports grew six percent in the second quarter over last year. Total foreign shipments rose to $8.431 billion, making it the best quarter for the state's exporters since the second quarter of 2015. The state slightly exceeded the national performance (by a mere tenth of a percent), with Tennessee ranking 22nd among the American states in its export growth.

The quarter's relatively good numbers were driven by a small set of industries that posted substantial export gains. Among large sectors, big increases were posted by the aircraft industry (up $80 million, a 27 percent gain), cotton (up $71 million, a 37 percent gain), and computers (mostly laptops, up $81 million, a 22 percent gain). Several smaller export industries also did very well. Exports of silicon more than tripled, to $98 million. Three nations, Germany, Korea, and Japan, accounted for almost all of silicon shipments. The scrap metal industry, agricultural and construction machinery, and nonwoven fabrics were other industries that did very well for the quarter.

A few industries, however, struggled. Cell phone parts were off $34 million, an 18 percent decline. Medicaments, DVD sales, and air conditioners all suffered more than 20 percent drops. A number of auto parts also experienced substantial losses. Transmission parts, for example, fell more than 16 percent, while the generic motor vehicle parts sector fell from $411 million in the second quarter of 2016 to $352 million this past quarter. The biggest percentage drops, though, were in the battery sectors. Electric battery exports dropped by more than half, to $69 million (this too was highly concentrated, with nearly all this loss in either Japan or the U.K), while primary cell and battery exports also fell by half, to just $17 million.

For automobiles, the state's largest export, the quarter was rather schizophrenic. Cars with larger engines (over 3,000 cc) did quite well, with exports up $70 million, while cars with smaller engines (between 1,500 and 3,000cc) did quite poorly, losing $116 million. Meanwhile hybrid vehicle shipments rocketed from zero to $79 million. Perhaps surprisingly, $72 million of that went to China. Jordan, of all places, accounted for half of the rest. The net of these disparate performances was a five percent gain for total motor vehicle exports.

Exports were strong in most areas of the world, with two big exceptions. Shipments to the Middle East fell dramatically. Tennessee exports this quarter were but half those of the second quarter in 2016, a more than $100 million loss. This was almost entirely due to a virtual cessation in automobile exports throughout the region. The second exception was South America, a region of faltering economic growth. There exports were down 14 percent, a loss of about $60 billion. The state's two largest markets on the continent, Brazil and Chile, both performed poorly. Brazil accounted for half of the region's losses.

Elsewhere the trends were positive. Though gains in Canada were slight, exports to Mexico were up over $100 million, thanks in part to increases in paper and construction machinery shipments. Tennessee sales in the euro region grew $150 million (15 percent), with substantial gains in the Netherlands, Belgium and Germany. No major European market posted losses for the quarter. Thanks to engines and aircraft, the U.K. also grew, gaining 13 percent for the quarter.

In terms of growth, though, Asia was the home of the state's best markets for the quarter. Exports to China increased from $570 million to $666 million, led by increases in chemical and computer shipments along with those hybrid cars. Shipments to Japan grew $68 million, almost the same percentage growth (16) as China. South Korea also increased its purchases from Tennessee by 16 percent, thanks largely to silicon. In Southeast Asia exports were up 13 percent, despite a small decline in shipments to Singapore. Thailand was the star of this region. Thanks to aircraft purchases, Tennessee exports soared from $37 million to $102 million. Cotton was the other major product driving export gains in Southeast Asia. Even exports to India were up strongly, albeit the numbers are much smaller. Exports to India grew by 21 percent, to $80 million. Finally, we should note South Africa, which doubled its purchases from Tennessee this quarter.

In all, it was not a bad quarter, particularly given the state's export difficulties in 2016. The breadth of the growth in terms of geography was particularly welcome. As economic growth appears to be gaining traction in many regions of the globe, we might feel optimistic about the state's export performance for the quarters to come.