Tennessee Trade Report 4th Quarter 2016

Tables and Graphs

Exports and Changing Markets

Tennessee's Largest Markets

The quarter capped a very difficult year for state exporters, with 2016 exports down 3.5% for the year.

Tennessee's 2016 fourth quarter exports declined by nearly $130 million from a year earlier. This was especially disappointing because total American exports actually gained a bit for the quarter (albeit not much). The state's 1.6 percent loss in exports placed it 34th among all states in export performance, a far lower ranking than the state usually sees. The quarter capped a very difficult year for state exporters, with 2016 exports down 3.5% for the year (from $32.596 to $31.47 billion).

The overall numbers hid a rather variegated quarter, however. Particularly in Eastern Asia, state exporters performed rather well. The Chinese markets (China, Hong Kong, and Taiwan) combined to produce an almost 15% gain in exports. Hong Kong, in fact, was the state's second-best performing of its larger export markets. This was largely due to a massive increase in cell phone related shipments. Taiwan, meanwhile, was the largest destination of Tennessee's star export for the quarter, silicon. Globally Tennessee's silicon exports have soared from less than $1 million in the fourth quarter of 2015 to $65 million last quarter. Shipments to China itself grew a solid 4% for the quarter to just cross the $500 million barrier.

Exports to Southeast Asia were equally strong. Led by growth in cotton, aircraft, and (again) cell phone parts, the region increased its shipments from Tennessee by 16% for the quarter. South Korea may be under fire by the administration for its trade restrictions, but those restrictions didn't prevent Tennessee exporters from posting a similar 16% gain in this market as well. Silicon and motor vehicles accounted for the lion's share of the increase.

The only sour note in the region was Japan. Tennessee exports there fell by 15%. The biggest problem was a dramatic fall in electric car batteries (from $62 million to $5 million). But even with this large decline, the total East Asian region was up over 6% for the quarter. We might note that an effect of the Japanese decline is that China has surpassed it as the state's largest Asian market.

If East Asia grew, North America at least held steady. Exports to Mexico crept up a bit for the quarter, from $1.17 billion to $1.19 billion. The small gain was enabled by increased shipments of cars and auto parts. Canada similarly inched up a bit, with state exports north of the border growing by $42 million (to $2.175 billion). Automobiles and computers accounted for much of the gain in Canada. Their growth was enough to overcome significant falls in aircraft, engine, and cell phone shipments. The latter appears to indicate a supply chain shift from Canada to East Asia. In total, exports to our NAFTA neighbors were up about 2% for the quarter.

If East Asia performed quite well and NAFTA also posted positive numbers, we can probably guess that in much of the rest of the world things were rather bleak. In the Eurozone, Tennessee exports were off a bit. A sharp drop in medicaments, combined with declines in the medical instrument and computer sectors, shaved about $14 million from quarterly state exports, a 1% loss. In the U.K., though, exports were off a lot. They dropped by more than $50 million, a 17% loss, in spite of a $28 million increase in the aircraft sector. Once again, electric car batteries headed the losses. (Nissan has a U.K. plant.) The other large decline, surprisingly, was in whiskey, which lost almost two-thirds of its sales to Britain last quarter.

Exports to Sub-Saharan Africa and to the Middle East were both off, while the Australian market proved one of the state's worst. Exports dropped more than $50 million to Australia, almost a quarter of the state's sales in the country.

The most difficult region of the world for Tennessee, however, was South America. With fourth-quarter foreign shipments declining from $449 million to $361 million, state exporters suffered a loss of more than $100 million. The large majority of these losses were in Brazil and Chile, the state's two largest markets on the continent. The automotive and the medical sectors both had very tough quarters in this region.

It was a bit of an odd quarter because, as we have seen, while overall the numbers were mediocre at best, the state's performance varied substantially by region. Worldwide, the medical industry had a weak quarter, as did the aircraft, artificial filament tow, and auto parts sectors. On the other hand, most chemical sectors, cotton, the cell phone industry, and especially the car and SUV industry performed rather well.

It might be foolhardy to predict a sudden turnaround in the state's recent export slowdown. But last quarter's loss occurred in October. By December, the 2016 trade numbers had caught up to a year earlier, and in both January and February 2017 exports ran ahead of 2016. So there is at least some evidence that more optimism is warranted for the months ahead.