Economic recovery has become widespread around the globe and Michigan’s exporting companies enjoy a strengthening in foreign demand for their products.
According to recently published statistics by the Organization for Economic Cooperation and Development, the global economy entered its recovery phase in the second half of last year. Recently, the Paris-based think-tank estimated the combined output of its member countries — the 30 richest economies in the world — to have jumped by an annual rate of 3.2 percent in the last quarter of 2009, following an increase of 2.4 percent in the third quarter.
Looking at state exports, 2010 dawns with news that foreign shipments from Michigan’s companies rose in the first month of 2010. The first picture of the year shows that exports of goods made in the Wolverine State leaped by $173.7 million to a monthly total of $3,547.0 million in January, adjusted for seasonal variation — a statistical process that equalizes monthly performance for factors such as the number of days in a month and holidays. It is the highest monthly exports mark in 16 months.
Growing exports add to domestic company sales, improve corporate profitability and generate jobs. How well have Michigan’s exporters done in January of this year in comparison to January of 2009?
Exports of goods from Michigan, seasonally adjusted, increased in January by an annual rate of 56.4 percent from the same month in 2009. As a result, Michigan ranked second in export growth among the 50 states in January.
Exports of manufactured goods were the key driver of foreign sales in January accounting for 85 percent of all state exports. Foreign sales from state factories increased in January by 3.6 percent from the previous month to $3,025.5 million, adjusted for seasonal variation.
Exports of non-manufactured goods went up 15.2 percent in January to $521.5 million, adjusted for seasonal variation. This group of shipments abroad 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, exports of goods, adjusted for seasonal variation, fell 0.7 percent in January to $98.4 billion.
What are the worldwide economic prospects for 2010 that will shape the volume of global trade and eventually the foreign demand for goods made in Michigan? Forward-looking indicators signal that global economic conditions — vital to export-related jobs in Michigan — are expected to strengthen in the rest of 2010.
The German Ifo Institute in co-operation with the International Chamber of Commerce, a highly respected Munich-based think-tank, just released the findings of the World Economic Survey for the first quarter 2010 indicating that the economic climate has improved further around the world.
In particular, Ifo’s global economic barometer — based on responses of about 1,000 business experts from 94 countries and tracking business activity since 1981— improved in the first quarter of 2010 as key indicators of global activity rose for a third quarter in a row.
“The economic climate improved above all in Asia. Also in North America, Western Europe and in the other world regions, the economic climate is more favorable than in the previous quarter,” explained Dr. Hans-Werner Sinn, president of the Ifo Institute for Economic Research at the University of Munich.
Looking forward, the participants of the World Economic Survey are again somewhat more confident.
“This speaks for a continuation of the recovery of the world economy in the coming months,” Sinn added.
Important for Michigan’s exporting companies are the survey’s findings about international trade, which reveal that WES experts from around the globe expect the volume of both exports and imports to increase in the next six months.
These leading indicators confirm the view that the global economy will stay on its recovery path at least in the next six months. Michigan’s companies selling their products abroad will continue to see incoming orders from foreign buyers to increase, which will result in higher production and more jobs.
The increased dependence of the state’s economy to global markets via exports is expected to contribute to overall state economic development more in 2010 than in 2009.
Evangelos Simos, chief economist of the consulting and research firm e-forecasting.com, is editor for International Affairs in the Journal of Business Forecasting, and professor at the University of New Hampshire. Simos may be reached at eosimos@e-forecasting.com.
