Record month for exports

In the latest snapshot of the state’s global business, sales of Nevada products rose to a record $344.4 million in January, beating the previous record of $332.9 set in December, adjusted for seasonal variation — a statistical process that equalizes monthly performance with factors such as the number of days in a month and holidays.

How did Nevada exporters fare in selling their products abroad this January compared with a year ago? The changing conditions of the global economy during the last 12 months had favorable effects on demand for Nevada goods. In January 2005, state companies shipped $155.5 million, or 82.4 percent, more goods abroad than in January 2004.

January’s exports were largely driven by manufactured goods, which accounted for 79 percent of all state exports. Foreign shipments from manufacturing companies were nearly flat, edging down by 0.7 percent from the previous month, to $271.4 million, seasonally adjusted.

On an annual basis, however, January sales abroad from state factories were $121.5 million, or 82.4 percent, higher than in January of last year.

Exports of non-manufactured goods went up 22.5 percent in January to $73.1 million, seasonally adjusted. This group of shipments consists of agricultural goods, mining products and re-exports, which are foreign goods that entered the state as imports and are exported in substantially the same condition as when imported.

 
For the country as a whole, U.S. exports of goods, seasonally adjusted, edged up slightly by 0.2 percent in January to a record level of $71.2 billion, following a 4.4 percent jump in December.

The slowdown in the growth of exports combined with a surge in imports generated the second-largest trade deficit in January.

Will the January slowdown persist?

The New York-based economic research department of the Bank of Tokyo-Mitsubishi conducts a monthly foreign trade survey to evaluate freight levels of current and future shipments from trade centers, such as ports, around the country. In the most recent survey, 24 percent of the respondents expect exports to be higher during the next three months, 52 percent expect no change and 24 percent anticipate a decline.

“Export activity is expected to wane over the next three months,” said Ellen Beeson, director of the bank’s economic research department.

The so-called realignment of currencies, which relates to an enduring change in a key currency against the dollar, has been one of the major global developments in the last three years. Of main interest for international trade is the strengthening of the euro.

Since February 2002, the euro has jumped 50 percent against the dollar, implying that businesses and consumers from the Europe could now pay 50 percent less than in 2002 to buy American goods if their prices had stayed the same.

The 12 members of the European Union have opted to use the euro as their currency and their integration has created the world’s second-largest market after the United States. Consequently, the EU is the largest potential single market for Nevada’s exporters.

Have Nevada companies reaped the benefits of a gradually rising euro? A strong euro makes Nevada’s goods cheaper in the EU’s single market and gives state exporters an extra advantage.

In January, $19.3 million of goods made in Nevada were sold to European buyers. Compared with January 2004, shipments to Euro-companies increased 28.6 percent in January.

National exports to the Europe accounted for 16 percent of all U.S. exports in January. After Canada, the EU is the second-largest destination of American-made goods.

At the state level, foreign shipments of goods from Nevada to Europe accounted for only 6 percent of all state exports in January. Nevada ranked 46th in dependence upon the economic health of the EU and its currency.

State exporters do not have a strong presence in the world’s second-largest market. The strengthening of the euro and an expected improvement in the economic conditions of Europe provide excellent business opportunities for state exporters.

Will the recent surge in the euro boost up state exports? It won’t happen right away.

“It may not be until mid to second half of 2005,” Beeson said.

 

  Evangelos Otto Simos, chief economist at the consulting and research firm Infometrica Inc., is editor for International Affairs in the Journal of Business Forecasting and professor and chair of the Economics department at the University of New Hampshire.

Simos can be reached at: eosimos@infometrica.com

Copyright © 2005 The Reno Gazette-Journal