Michigan’s economy took an unprecedented beating at the end of last year and in the first quarter of 2009, with big job losses in industries that rely on selling their goods abroad. International trade flows have gone through their sharpest slump since WWII, highlighting the harshness of the global recession.
In the first quarter of 2009, worldwide exports — a measure of global trade as one’s exports are someone else’s imports — totaled $2.7 trillion, the lowest quarterly reading since the last quarter of 2005. Most important, at their recent mark, worldwide exports have shrunk $1.5 trillion, or an astonishing 36 percent, from the recent peak just nine months ago, in the second quarter of 2008.
The global economic recession has not ended but it seems the worst is behind us. Consequently, the recent unparalleled fall in global trade is not expected to be repeated in the months ahead. The paces of both economic recession and trade contraction are slowing down.
The latest snapshot of state international trade shows exports of goods made in the Wolverine State to have increased by 6.9 percent in April, following a decline of 6.9 percent in March. Michigan’s exporters shipped abroad $2,433.7 million in goods, adjusted for seasonal variation — a statistical technique that smoothes out monthly fluctuations for factors such as the number of days in a month and holidays, thus making state monthly trade indicators comparative to the national numbers.
Were Michigan’s companies selling goods overseas better off in April of this year than a year ago? Exporting companies fell behind their previous year’s monthly volume by $1,357.5 million, or 35.8 percent.
Foreign sales from Michigan’s manufacturers led April’s exports, accounting for 87 percent of all state sales abroad. In April, exports of manufactures jumped 8.9 percent from March to $2,119.9 million, seasonally adjusted.
For the nation, exports of goods fell 3.1 percent in April to $80.0 billion, seasonally adjusted, the lowest monthly mark since January 2006. April’s fall in U.S. exports of goods reflected sharp declines in foreign sales of industrial supplies and materials, and capital goods.
How did Michigan’s exporters fare among the 50 states in foreign sales growth in the first four months of 2009? In comparison with the same period of 2008, exports from Michigan’s companies, seasonally adjusted, decreased by an annual rate of 37.5 percent, compared with an average decline of 22.4 percent for all 50 states. As a result, Michigan ranked 47th among the 50 states through the first four months of 2009 in export growth.
What are the prospects for global international trade in the second half of the year, which will determine the demand for Michigan’s exports and ultimately have an effect upon thousands of export-related jobs and overall economic development? The latest forward-looking indicators point to a stabilization of global trade and its return to moderate growth.
The global economic climate shows signs of improvement for the first time since the end of 2007, according to the latest findings of the World Economic Survey conducted in the second quarter of 2009 by the Ifo Institute of Economic Research at the University of Munich in cooperation with the Paris-based International Chamber of Commerce and the European Commission.
The latest reading of the World Economic Survey overall indicator, which captures worldwide economic conditions, rose in the second quarter of 2009 from the previous quarter, but it is still significantly below its historical trend associated with global economic growth.
Reporting the results of the survey, Hans-Werner Sinn, president of the research institute, underscored that the indicator’s improvement is the result of “more favorable expectations for the coming six months.” However, “the assessment of the current economic situation worsened again, falling to a new record low,” Sinn added.
About 1,000 executives from 90 countries participating in the international survey appraised the current worldwide economic conditions to be worse than a year ago. Looking at the rest of 2009, the executives expect the global economy to slightly improve, thus recovering at a moderate pace.
Important to Michigan’s exporting companies are the findings of the World Economic Survey about international trade. The business experts from around the world anticipate the global volume of trade to further deteriorate in the second half of 2009, compared with current trade activity.
The expectation of weakening in worldwide trade translates to unwelcome news for Michigan’s exporters. In the second half of 2009, orders from abroad are not projected to increase from current levels, which would continue to adversely affect production and export-related jobs in the Wolverine State.
Evangelos Simos is chief economist of the consulting and research firm Infometrica Inc.