Tennessee Trade Report 4th Quarter 2017

Tables and Graphs

Exports and Changing Markets

Tennessee's Largest Markets

The fourth quarter's gains ended a good year for state exporters.

Tennessee's exports grew by almost 6 percent this past quarter. That is a gain of $470 million from a year ago. It ended a good year for state exporters. At $33.3 billion, 2017 annual exports gained a similar 6 percent over 2016. That said, the state lagged the national export performance during the fourth quarter. American exports were up 7.8 percent, and 30 other states had higher export growth rates than Tennessee's.

We noted in our third quarter report that the state's export gains were uncomfortably concentrated in one sector, the aircraft industry. That changed in the fourth quarter. Export gains were widely distributed across different industries. There were a few spectacular performers, however. The largest dollar gain among all Tennessee exports was in the cell phone industry. Shipments soared from $194 million in the last quarter of 2016 to $312 million this past quarter. These are mostly going to East Asia (especially Hong Kong) and South America. Next best was earth-moving equipment (bulldozers, mostly), for which exports more than tripled. This gain was almost entirely in Canada. Kraft paper and paperboard exports grew from $68 million to $109 million. Finally, while whiskey exports usually jump in the fourth quarter because it's the holiday season, this season was unusually cheery. Sales rose by nearly a third, to almost $200 million, from a year earlier. Most of this gain was in Europe.

The state's two biggest export sectors, automotive products and medical products, posted solid numbers though nowhere near those above. The auto industry featured two almost perfectly counteracting trends. There was a huge increase in the export of assembled cars and trucks. A large part of this was because of the continued increase in sales of hybrids in China. Among the state's big car markets, only Saudi Arabia was down this quarter. But these gains were almost offset by equally large declines in the shipments of automotive parts. This includes gas engines and aluminum plating (mostly used for stamping body parts). As a result, the entire sector ended by netting around $30 million in increased shipments for the quarter.

The medical sector also made modest gains. Exports of medical instruments were up $17 million, a 2.6 percent increase. Pharmaceutical shipments grew 10 percent, to $129 million. On the other hand, foreign sales of orthopedic products were essentially flat for the quarter. Combined, this sector also saw an export increase of about $30 million.

Very few of the state's exported goods suffered declines for the quarter. Almost all of the most serious involved staples, manmade and natural, used for weaving clothing or textiles. Cotton shipments fell from $121 million to $74 million, while exports of polyesters, nylon, and rayon were also down. These losses were almost all in China and Southeast Asia, the centers of global apparel production. This suggests that the entire industry was having a slow quarter.

Geographically, Central America repeated its third quarter performance as, in percentage terms, Tennessee's best-performing market. Exports to that region almost doubled. Though Costa Rica was the main destination, shipments were up to almost all Central American countries.

Among larger trade regions, Tennessee exporters made the biggest gains in East Asia, as has so often been the case recently. Exports to China and Japan were each up by over $100 million. Exports to Hong Kong added another $50 million. The only sagging market in the region was South Korea, where exports fell by about $20 million (about a 10 percent decline). State exports also performed very well in South America, where cell phones and computers led the way in producing another $100 million gain. The lion's share of the increase was in Brazil and Chile. Europe essentially held its own, with Tennessee exports up, but negligibly.

Closer to home, Canada and Mexico went different directions. Shipments to Canada were up $56 million, thanks mostly to automobiles and those bulldozers. Sharp losses in computer sales, auto parts, and recorded DVDs limited the gains. Exports to Mexico, however, were down by almost the same amount. Here the losses were almost entirely in the automotive sector.

Tennessee exports declined in only one region, the Middle East. This was due to a steep drop in car exports to Saudi Arabia.

In 2017, exports grew consistently over all 12 months. That was a change from recent years. As 2018 begins, the (still) steadily improving global economy is combining with the falling dollar to create terrific tailwinds for Tennessee exporters. We look forward to seeing the results as we get further into the year.