International Trade Report 3rd Quarter 2015

Tables and Graphs

Exports and Changing Markets

Tennessee's Largest Markets

Third-quarter state exports fell 2.2 percent but fared much better than the nation's.

The slowing global economy has proved too fierce a headwind for Tennessee exporters. Third-quarter exports fell 2.2 percent in value, to $8.057 billion. The good news, if you wish to call it that, is state exporters still fared much better than their national counterparts. Total American exports fell by somewhat more than 8 percent for the quarter.

Three regions accounted for most of the decline. China, whose economic slowdown has been big news for months, purchased $563 million in Tennessee goods for the quarter, a fall of more than $50 million from a year ago. This 9 percent drop was concentrated in motor vehicle sales along with exports of artificial filament tow, cotton, and medical instruments. Not every export sector suffered, however. State exports of computers and car engines were both up solidly. However, there is no getting around the negative impact of China’s slowing growth on Tennessee exports.

The second difficult region was in many ways a consequence of China’s reduced growth. State shipments to South America fell by almost 16 percent for the quarter. This steep decline is in large part the result of the falling global commodity prices that have so reduced the earnings of many Latin American nations. Brazil, the largest market, dropped 19 percent, while exports to Argentina were off by almost a third and to Colombia by 38 percent. These losses were concentrated in the aircraft, automotive engine, and chemical sectors. Venezuela was actually one of the worst global markets for Tennessee exports, as shipments to that nation fell from $21 million to $5 million. This, however, was more due to the economic meltdown in that nation than to anything going on in China. Once again, there were bright spots. Chile was up strongly, as state export grew by $33 million (to $125 million). Chile, by the way, has become by far the second-largest South American market for state exporters.

The third problem area was our neighbor to the north, Canada. The reason was not all that different from these two other regions. The drop in commodity prices, the ensuing recession, and the fall of the Canadian dollar are eating into Canadians’ purchasing power. As a result, in spite of a modest increase in automotive exports, Tennessee’s shipments to Canada fell by a bit over 6 percent, to $2.048 billion. No single product was particularly responsible for this drop, though laptops, car engines, and heaters all dropped by $10 million or more. For the past several quarters, we have noted this Canadian slowdown. Mexico had been riding to the rescue, allowing overall Tennessee exports to the NAFTA market to keep growing. But this quarter the gains in Mexico were more modest, about 2 percent, not enough to overcome the losses in Canada.

The rest of the globe was a bit brighter. Japan (a $12 million gain, to $442 million) and the Eurozone (a $7 million gain, to $972 million) at least held their own. (Britain’s $10 million decline, however, pushed the whole E.U. market slightly into negative numbers.) Korea was up about $20 million, as were the nations of Sub-Saharan Africa. A surge in auto sales to the United Arab Emirates was the key to a surprisingly strong 14 percent increase (to $381 million) of exports to the Middle East. Shipments to the Southeast Asian nations were also up 14 percent. Medical instruments and cotton accounted for much of that gain.

Sectorally, the auto industry continued to forge ahead, with car exports, car engine exports, and many auto parts exports all ahead for the quarter. This industry was joined in the winner’s circle by the industrial instrument sector along with storage batteries.

Unfortunately, as one would expect with negative numbers, more sectors lost than gained. The aluminum industry stands out. With the industry’s troubles well known (and Alcoa closing U.S. smelters), it is perhaps not a surprise that aluminum exports fell from $144 million to $78 for the quarter. That’s equivalent to one-third of the state’s total export losses. Plastics and chemicals both posted sharp losses. The chemical declines were mainly in cellulose and the coloring/dye industry. Foodstuffs did not fare too well either, with frozen chicken exports cut in half and sugars falling from $24 million to $7 million for the quarter. But in truth this was one of the (happily) rare quarters where many export sectors were unable to forge any gains.

With both the IMF and the OECD recently revising their global growth figures downward, it would be unrealistic to anticipate a rapid turnaround in state export growth. The Institute for Supply Management’s October survey continues to report that the trend for U.S. manufactured export orders is contracting. A real turnaround in exports may await a more vigorous global economy. Until then we can hope that Tennessee exports will outpace the nation and perhaps even make some modest gains in a very tough environment.