Tennessee Trade Report 2nd Quarter 2016

Tables and Graphs

Exports and Changing Markets

Tennessee's Largest Markets

State export numbers were almost uniformly negative in the second quarter.

The slow global economy is finally biting into the sales of Tennessee exporters. The state's exports tumbled 7.6%, to just under $8 billion, for the second quarter of 2016. In percentage terms, this drop was a bit larger than for that of American exports overall (6.1%).

The fall-off was just about across the board. Sixteen Tennessee commodities exported more than $100 million in the second quarter of 2015 (measured at the 4-digit HS). Exactly three of those posted export gains in the second quarter of 2016. Of those, only the cell phone equipment sector could truly be said to have had a good quarter. A large increase in shipments to Hong Kong led it to a solid 20 percent increase (to $188 million). Two smaller commodities, auto transmission parts and electric storage batteries, also turned in profitable second quarter numbers.

But these few winners were really bucking the tide. Of the state's large export commodities, five suffered double-digit declines. They were led by the computer sector, which saw significant drops in both laptop and PC shipments. In fact, large losses in Canada, Mexico, the Netherlands, and Chile cost the state one-third of last year's second-quarter computer exports.

For several recent quarters the auto industry had almost single-handedly kept the state's export numbers in positive territory. Not so last quarter. Shipments of cars were down sharply, with losses concentrated in China, the United Arab Emirates and Canada (though the gloom was not universal—SUV sales were up in Saudi Arabia). Motor vehicle parts experienced the same difficulties. Cotton, artificial filament tow, medicaments, coloring matter, and whiskey were among the other sectors that really struggled.

Many of the losses came in the same markets. Exports to China dropped by more than $100 million. In percentage terms, it was one of the two most difficult major global markets for state exporters. China accounted for the lion's share of the declines in Tennessee's automotive, cotton, and artificial filament tow shipments.

But China was hardly alone as a tough market. The rest of East Asia also did poorly. Exports to Japan were down almost 10% (to $409 million), thanks to declines in various medical related exports, which today account for most of the state's exports to that country (along with automotive products, of course). South Korea was no better. State exports there were off more than 10% as well. Shipments to Southeast Asia were similarly down about 10%—sort of the magic number for the month—while exports to the Middle East were off 5%.

The rest of the world wasn't all that much different. Shipments to South America fell from $516 million to $441 million, thanks to double-digit losses in Brazil, Colombia, Argentina, and Peru. The UK was the site of an almost 15% drop, despite a large increase in electric storage battery exports. The rival for China as the state's worst market was Mexico. Shipments south of the border fell almost 20% for the quarter. Tennessee exports to Mexico were their lowest since the first quarter of 2013. Computers, auto parts, diesel engines, and cotton were at the heart of this sizable loss.

The state's two "best" markets for the quarter were Canada, where losses were held to a modest 3% (to $2.255 billion), and the euro zone, to which exports fell just 2%. A few smaller markets, such as Israel and Oman, were very strong (in these two cases due to sales in the aircraft industry), but they could not make up for the declines elsewhere.

It has been quite a few quarters since the numbers were as almost uniformly negative as they were this past quarter. The third quarter has not started out particularly well, either, with July exports down a bit more than 3%. We can hope that some of the difficulty was due to the spike in the dollar at the end of 2015, but the reality is that we will probably have to see much stronger global growth to return to the kind of export growth the state was experiencing only a few quarters ago. When that will happen is anybody's guess.