3rd Quarter 2008


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tennessee monthly exports


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Tennessee International Trade Report

by Steven G. Livingston

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Tennessee's exports crossed the six billion dollar mark for the third quarter of the year. At $6.153 billion, the state's foreign sales were up nearly $700 million from a year ago. These good numbers, however, again fell short of the overall American export growth rate and were primarily due to a tremendous July. The rest of the quarter was much weaker for state exporters.

Exports were strongest outside of North America and among those industries best able to benefit from the weaker dollar that characterized the first half of the year. Exports to Canada and Mexico were not as strong, in large part because they are concentrated in the automotive and computer sectors where the state has been having its problems over the past two years. Sales in Canada were up, but by only $55 million, less than a 4% gain. The problems were indeed cars and computers. Laptop sales were off almost $30 million, while motor vehicle part sales fell by nearly $20 million. Difficulties in these sectors were enough to offset the solid growth in almost all other industries, leaving the state with pretty anemic numbers in its largest market. Mexico was more or less the same story. Tennessee exports rose less than 1% (to $646 million) because of sizable drops in a variety of automotive-related products. Aluminum plating suffered the most, falling from $79 million in 2007's third quarter to just $14 million in 2008's.

The state's export growth, then, was in the rest of the world. Latin America, Japan, China, and Europe were all extremely strong, while the Middle East (up 15%) and Southeast Asia (8%) were at least solid. The latter would have been much better were it not for a large fall in computer-related shipments to Malaysia. That country is the site of substantial Dell operations, accounting for the fall.

Tennessee's Latin American exports grew to $517 million, 25% higher than in 2007. Brazil, the largest market, was the site of one-third of this gain. Chemicals, Tennessee's traditional major export to the region, posted some very good numbers and were joined this quarter by the medical instrument and electrical machinery sectors.

These same industries forged huge gains in Japan, as sales to that nation were up a full third (to $315 million). Medical instruments and orthopedics alone made up 28% of the state's third-quarter exports to Japan. China was also up by a third (to $394 million). Here the story was more in the textile area, as the biggest gains were in cotton, artificial filaments, and nonwoven textile materials. Exports to Taiwan and Hong Kong also soared, leading to a combined export growth of $146 million to the entire Chinese economic area. These latter markets were the sites of substantial increases in electronic and chemical products.

The euro area and the U.K. formed the fourth region in which the state saw some very good numbers for the third quarter. Tennessee exports inside the euro countries were up $50 million (to $852). As one might guess by now, medical instruments and chemicals led the way, although it was a good quarter for electrical machinery ($50 million) as well. The Low Countries accounted for most of the increased exports, with the Netherlands buying an additional $35 million of Tennessee goods and Belgium another $18 million. Medical instrument sales to Belgium increased by $47 million, the best single-market gain by an industry for the quarter. The U.K. added another $29 million to Tennessee's export gains for the quarter, a 12% gain mostly due to medical instruments along with turbojets and unrecorded sound media (DVDs and the like).

State exporters did well in Australia last quarter (a 20% gain) and in India (Tennessee exports were up a third to $48 million). Most other smaller markets were flat.

As should be obvious by now, medical instruments were the state's strongest export. Sales grew by 15% globally. They now outstrip Tennessee's second-largest single export (laptops) by nearly a third. Among the many chemical products posting strong numbers were titanium dioxide preparations ($105 million) and miscellaneous cellulose derivatives ($61 million). Losses for the quarter were concentrated in the automotive sector, with cars and SUVs each down about 4%. Almost anything made to go in or on an automobile was similarly down. Though laptop exports themselves gained 7%, parts and accessories for them were down more than 50%. This was the poorest performing major export outside the automotive sector.

The big picture is one of solid growth across the large majority of Tennessee's export industries but continuing problems in the transportation and computer sectors, the state's largest and third-largest exporting industries. Until they return to health, it is unlikely Tennessee will return to the dynamic export growth of three or four years ago. There is little to suggest that either sector will regain its footing in the near future. Indeed, even flat export numbers may be a significant achievement for many automotive products. State exporters now must deal with the global economic chaos as well as the strengthening dollar of the past few months. The coming quarters will prove interesting for anyone in the export industry.

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