The Sixth District’s Exports to the European Union
The European debt crisis erupted at the end of 2009, after Greece revealed that its government finances were in very bad shape. Stresses in the financial markets, brought on by investor concerns about Greece’s and other European governments’ ability to pay their debts—as well as worries about the banking system—were quickly transmitted to Europe’s economy.
Real gross domestic product in the 27-country European Union (17 countries within that political bloc use the euro as a common currency) began to fall in the fourth quarter of 2011. At the time, a SouthPoint post looked at what the European crisis might mean for the Southeast, given the region’s trade connections with Europe. The conclusion was that Sixth District’s economy was not immune to European problems. Later, in early 2012, a SouthPoint post sifted through the U.S. International Trade Administration’s (ITA) data to determine which District’s states would be more vulnerable to the contracting EU economy.
The recently released ITA state merchandise exports data for 2012 now allow us to quantify how resilient the District’s exporters were to the European crisis last year.
First, let’s put the Southeast data in the national context. In 2012, U.S. merchandise export growth decelerated substantially, to 4 percent from 16 percent in 2011. (Part of the deceleration can be attributed to changes in prices—according to the U.S. Bureau of Labor Statistics, export prices grew 8 percent in 2011 and were virtually unchanged last year.) U.S. exports to the European Union fell 1 percent last year (to $265 billion)—a marked change from the 12 percent growth in 2011. Chemicals (led by pharmaceuticals), transportation equipment (mostly aerospace-related), computer and electronic products, and industrial machinery are the top four U.S. merchandise exports to Europe. Within those categories, growth in exports of pharmaceuticals held up pretty well last year, sales of transportation equipment were mostly unchanged, while U.S. exports to Europe of basic chemicals, semiconductors, and some types of machinery saw notable declines.
As it turns out, the Sixth District did better than the United States as a whole. Exports to the European Union increased 4 percent last year. All the Sixth District states except Mississippi are among the top 20 states that export to the European Union, and only Florida saw its exports to Europe shrink last year. Louisiana’s exports increased 15 percent and Alabama’s rose 8 percent, while sales to Europe were essentially unchanged last year for Georgia, Tennessee and Mississippi.
Looking into the industry mix—which products Europe imports from each state—can help explain the varying export performance across the District. (Another big factor, of course, is the countries within the EU to which states sell their products.)
Let’s start by looking at Louisiana—not only the state where exports to Europe grew at the fastest rate in the District last year, but also the nation’s fifth-largest exporter to the European Union. Louisiana’s biggest export to Europe, as to the rest of the world, is petroleum and coal products. These products accounted for about two-thirds of last year’s growth in the state’s exports to Europe. Most of the rest of that growth came from a 47 percent jump in exports of agricultural products, largely grains and oilseeds.
The industry mix is very different for Alabama, where exports to Europe also grew in 2012. Most of the growth was driven by a 43 percent increase in sales of transportation equipment. For most other industries in Alabama, sales also changed at double-digit rates—both up and down. There was little inching up or edging down; it was more like soaring or plummeting. Chemicals and paper—the state’s two other big exports to Europe—fell by about 25 percent, exports of fabricated metal products rose nearly 60 percent, and Alabama’s sales of wood products to Europe increased more than 80 percent.
Exports of wood products to Europe did even better in Georgia, growing by nearly 500 percent last year to $81 million. As Tom Cunningham—the Atlanta Fed’s regional executive for Georgia—explains, the European Union (and in particular, Germany) is increasingly relying on renewable energy, and there’s been a huge surge in taking Georgia’s readily available pine, pelletizing it, and shipping it off to be burned in Europe. This appears to be a common theme in the South Georgia pine regions. But pellets are still a niche export. Georgia’s total exports to Europe did not grow last year, mostly because the state’s sales of transportation equipment—Georgia’s largest export to the European Union—fell 10 percent.
Growth in exports to Europe also stalled in Tennessee last year. While many of the state’s industries faced a decline in demand from across the Atlantic, total exports to Europe held up because of 15 percent growth in sales of computer and electronic products. Tennessee’s second-largest export to Europe—medical supplies and equipment—also grew, albeit at a much more modest 2 percent.
Similar to Tennessee, but on a much smaller scale, Mississippi’s exports to Europe were boosted by sales of computer equipment and medical supplies and equipment. The aerospace industry also did very well in terms of sales to Europe. However, because of big declines in exports of chemicals and paper, Mississippi’s exports to Europe were essentially the same as in 2011.
While computer and electronics industry fared well in Tennessee and Mississippi, Florida was one of the worst hit in terms of exports to Europe. That industry is the state’s second-largest exporter to Europe, so a 23 percent decline in those exports accounted for a big part of the 7 percent drop in Florida’s total exports to the European Union.
Overall, the Sixth District’s exporters to Europe showed resilience last year, benefiting from the continent’s demand for our energy and agricultural products, certain types of electronic products and medical supplies, as well as a notable increase in prices for some of those products. Still, as European economy stabilizes in 2013, let’s hope for a better year for our exporters.
By Galina Alexeenko, director of the Regional Economic Information Network for the Atlanta Fed’s Nashville Branch
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Exports from U.S. Metropolitan Areas
The U.S. economy is famous for being consumer focused, with personal consumption expenditures accounting for about 70 percent of the country's gross domestic product (GDP). Compared with other economies, it is also a fairly closed one—exports' share of GDP is only about 13 percent. For many Americans, the phrase "international trade" is synonymous with "trade deficit" since the country for decades has imported more than it sold abroad. And although the aforementioned facts are perfectly true, they are masking an important and growing phenomenon—the U.S. economy's increasing reliance on foreign demand. So here's another fact: exports have become a potent engine of the current economic recovery, having contributed 45 percent to U.S. GDP growth since the end of the last recession—more than in any recent economic recovery.
Last year, the United States exported about $2.1 trillion in goods and services. Exports of services, such as consulting and other business services, accounted for about 30 percent of U.S. exports. (The United States is the largest exporter of services in the world.) The rest—about $1.5 trillion—were U.S.-made goods, industrial materials, and agricultural products, also known as "merchandise exports." Last week, the U.S. Department of Commerce released the report that showed a breakdown of U.S. merchandise exports by U.S. metropolitan areas for 2011. The report is based on the U.S. Census Bureau's Origin of Movement–ZIP code Based Series, which allocates exports to states and localities based on the address of the legal entity, such as a manufacturer, that receives the benefit from the export transaction.
The data for merchandise exports are now available for the 367 metropolitan statistical areas (MSAs), although the value of those exports is concentrated in the top MSAs. In the Sixth District, five MSAs showed up on the top-50 list: Miami-Fort Lauderdale-Pompano Beach (#5), New Orleans-Metairie-Kenner (#15), Atlanta-Sandy Springs-Marietta (#18), Tampa-St. Petersburg-Clearwater (#38), and Nashville-Davidson-Murfreesboro-Franklin (#45). Together, just these District MSAs alone accounted for about 7 percent of the country's merchandise exports last year.
The Miami metropolitan area is by far the largest exporter in the District. In 2011, it exported $43 billion worth of merchandise, accounting for two-thirds of Florida's merchandise exports. Miami's exports are dominated by computer and communications equipment and are shipped mainly to Latin America. For Florida's second-largest exporter, the Tampa metropolitan area, computer and electronic products were also the dominant export, but Tampa's export destinations were a bit more diversified across continents—in addition to Latin America, a big share of Tampa's exports sold in Canada, India, and China. Miami and Tampa are also big exporters of transportation equipment.
The Sixth District's second-largest exporter, the New Orleans metropolitan area, stood out in 2011 as the metropolitan area that recorded the highest exports growth in 2011 among the top 25 metropolitan exporters. Exports from New Orleans soared more than 45 percent between 2010 and 2011, boosted to a large degree by higher shipments of petroleum products. Top export destinations for the New Orleans area last year were Japan, China, Mexico, Singapore, and the Netherlands.
Somewhat surprisingly, Singapore—a small city-state—is also the third-largest export destination (our neighbors in North America took the first and second place) for goods produced in the Atlanta metropolitan area—my former hometown. Atlanta's exports are concentrated in transportation equipment and machinery. And finally, the Nashville metropolitan area (which happens to be my new hometown), which is known for its auto industry, relies on exports of transportation equipment, as autos and parts follow the NAFTA supply chains.
Overall, the latest MSA export data clearly show that a lot of products made, extracted, or grown in the Sixth District's largest MSAs end up in foreign countries. So, no wonder the latest slowdown in global growth has become a concern for many of the region's businesses.
By Galina Alexeenko, director of the Regional Economic Information Network at the Atlanta Fed's Nashville Branch
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Exploring trade connections between Europe and the Southeast
Thanksgiving. What a great holiday. Family, friends, turkey, stuffing, apple pie (not a big pumpkin pie fan). And perhaps, if we are true to the spirit of the holiday, a time to pause and remember all there is to be thankful for. My list contains the usual suspects—wife, kids, parents, friends, and others that no doubt would be on your list as well. One item that's on my list that would surprise me to find on yours would be Europe.
There's a little more to it than just "Europe." In 1985, my parents sent me to study in Europe for my junior year of college. Miami University (the one in Ohio) has a small campus in the Grand Duchy of Luxembourg, and I studied there from September to May of 1986. I still don't know how my parents did it on their wages—but they did, and I'm ever thankful because my year in Europe did as much to mold me as any other experience.
Of course today, not many people are feeling particularly thankful for the European debt situation, which is causing much-discussed pain and uncertainty in the global economy. It's a topic that's been on Atlanta Fed President Dennis Lockhart's mind. He shared this concern last month in a speech in Chattanooga, Tenn., when he noted that the U.S. fiscal situation and "financial instability from developments in Europe" were the most significant risk factors facing the U.S. economic outlook. As more news has come out of Europe in the weeks since then, many have discussed the risk of possible financial contagion from the situation there spreading "across the pond" to the United States.
Federal Reserve Vice Chair Janet Yellen mentioned the issue in her November 11 speech in Chicago:
"We are monitoring European developments very closely, and we will continue to do all that we can to mitigate the consequence of any adverse developments abroad on the U.S. financial system."
Fed Chairman Ben Bernanke offered some thoughts about the European situation in response to a question at his press conference following the FOMC meeting on November 2:
"...what we can do, really, is only a couple of things. One is that we can look at our own financial institutions and try to assess the exposures and the linkages between our institutions and those in Europe and the sovereign debt in Europe, and we've been doing that on a consistent basis. We've looked also, of course, with other regulators at money market mutual funds and other types of financial institutions that have connections to Europe...
"And the other thing that we can do is stand ready, if necessary, to provide whatever support the broader economy needs and the financial system needs, should things worsen. I mean, we are hopeful that the latest measures, vigorously implemented, will indeed ultimately reduce these stresses, but in the case that things do get worse, both monetary policy and our policies of lender of last resort are available to insulate the U.S. economy from the effects."
The other channel where problems in Europe can affect the United States is through international trade. The members of the European Union have accounted for roughly 20 percent of U.S. exports over the last decade. Thus, any slowdown or decline in economic activity in Europe would most likely lead to a decline in demand for U.S. goods there, which in turn would lead to a decline in U.S. exports to Europe.
How would such developments affect the Southeast? Over the past decade, the states of the Sixth District have shipped an average of nearly $22 billion worth of goods per year to the European Union member countries. The dollar value of these goods accounts for almost 19 percent of total exports from the six states in the region—a number similar to the United States as a whole.
The importance of Europe as an export market varies by state, as the table below shows. Complete data are available through 2009, but by using the 10-year average we can see the longer-term pattern.
Based on these figures, Florida ships the most goods in terms of value to Europe, but Alabama is more dependent on exports to Europe than any other state in the region. Georgia also sends a significant portion of its total exports to Europe. While there is concern about the financial impact of instability in Europe, a souring of economic activity across the Atlantic would also affect international trade. In either case, the region is not immune.
I'll be thankful when Europe's debt issue is resolved.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
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Regional poultry industry and exports
The poultry industry is the region's most important farm-producing sector. This $10 billion cash-producing sector is also the region's top farm exporter, one of the few national industries producing a trade surplus (see EconSouth Q4 2009).
According to the National Chicken Council, U.S. exports of poultry products in 2009 accounted for 18.8 percent of production. The economic impact on the poultry industry on District states is significant, according to an American Meat Institute (AMI) study. The AMI report estimated that in 2009 incomes paid by poultry companies in the region reached $8.2 billion, with the industry supporting nearly 49,000 jobs, mainly in Georgia, Alabama, and Mississippi.
Although the poultry industry this year has been boosted by improving domestic demand and lower feed costs, risks to the outlook exist, namely trade relationships with Russia and China—the nation's top poultry export markets. Chart 1 shows that in recent years, U.S. poultry export values were led by strong demand from Russia and China, countries that from 2006 to 2008 nearly doubled their purchases to $4.2 billion. In 2009 and early 2010, however, exports to China and Russia plunged dramatically as those countries boosted domestic production and placed limits on U.S. poultry imports.
Russia had been the top overseas buyer of U.S. chicken, accounting in 2009 for about 20 percent of U.S. broiler exports. In 2009, U.S. poultry shipments to mainland China accounted for about 18 percent of overall U.S. broiler exports. About half of the chicken parts sold to China are wings and feet, which are worth only a few cents a pound in the United States. In contrast, these products in China fetch more than 60 cents a pound, a price that no other foreign market comes close to matching.
Recently, the U.S. Bureau of the Census reported that through February 2010 total U.S. broiler exports in early 2010 were down 14 percent from the first two months of 2009. A large portion of the decrease was the result of falling shipments to Russia and China.
The decline in overall poultry exports in 2010 was not offset by larger U.S. poultry shipments to Hong Kong (a 335 percent year-over-year increase) and Canada (a 21 percent year-over-year increase).
Although poultry exports are a small piece of U.S. international trade, the industry supported by this trade and the resulting wages and revenue are important to the region.
By Gustavo Uceda, a senior economic analyst in the Atlanta Fed's research department
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