California Exports Soar 25%
The Golden State's overseas sales surge during the first quarter of the year
LOS ANGELES - 05/12/04 - A growing global economy and a cheap dollar are making "Made in California" products a lot more popular, reports Don Lee in the Los Angeles Times.
Exports of California-manufactured goods increased 25% in the first quarter compared with a year earlier, according to government trade figures released Wednesday. Shipments to China, where demand is booming, jumped more than 70%.
California's export business fell harder than other states' during 2001 and 2002 because of the weakness in the technology sector. Now, rising global demand for computers, communications equipment and semiconductors is once again giving the Golden State an outsize share of the nation's shipments abroad.
The sharp upturn bodes well for the state's economy and the hiring outlook in California, the paper said.
"It's tremendously good news. It's a sign that the demand from overseas is spurring our regional economic growth," said Rob Valletta, an economist at the Federal Reserve Bank of San Francisco. He added that "there was nothing on the horizon" that suggested this trend wouldn't continue in the near term.
Growth in California exports is coming against a backdrop of a strengthening US economy, which is also boosting the flow of goods coming into the nation. A separate report Wednesday from the Commerce Department showed that the US trade deficit widened in March to a record $46 billion, with growth in imports almost triple that of exports in dollar volume.
The March trade gap with China grew to $10.4 billion from $8.3 billion, despite record exports to that country.
The bigger-than-expected US trade deficit was due largely to high oil prices and increased demand for imports from American consumers. After the trade statistics were released, stocks tumbled before recovering later in the day. A ballooning trade deficit is seen as a negative for the US economy because exports add to domestic output and imports generally take away from economic activity at home.
The increase in California exports in the first quarter was nearly double the gain for the US as a whole.
There was no comparable data on imports to California in the quarter. But in the first two months of this year, the value of all goods entering the Los Angeles Customs district rose 12.1% from a year earlier, to $26.49 billion, while the value of exports was up 13.8% to $11 billion, said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp (LAEDC).
"The momentum seems to be with growing exports," Kyser said.
California is more dependent on foreign trade than most states, with sales of merchandise overseas accounting for about 10% of the economic output, and export of services such as licensing rights for films and travel generating an additional 5%.
More than 1 million jobs in the state are supported by international trade.
Analysts said the rebound in exports this year added to evidence that stronger job growth might be around the corner. Industrial production, company earnings and business investments all have picked up noticeably in recent months, yet California's employment growth has lagged behind the nation's.
Some economists have attributed that to the state's higher business costs, among other factors. But the latest export statistics suggest that manufacturers, particular in technology fields, will need to beef up employment to meet rising demand.
California's employment report for April will be released tomorrow.
"One would certainly expect that these export numbers would lead to job growth," said Jon Haveman, a research fellow at the Public Policy Institute of California. Haveman, who specializes in trade issues, said the quarterly recovery in tech exports was particularly impressive.
California shipments of computers and other electric equipment and machinery increased about 21% in the first quarter from a year earlier, to $12.2 billion, according to federal government data prepared by the Massachusetts Institute for Social and Economic Research. Exports of medical and surgical instruments rose 22% to $2.86 billion while aerospace parts and equipment more than doubled to $2.65 billion.
"We are absolutely seeing a lot of orders," said Gary Johnson, vice president of Ace Clearwater Enterprises Inc., an aerospace parts supplier in Torrance. Johnson projected that his company's exports would nearly triple, to as much as 15% of the firm's overall revenue this year, from 2002. Partly because of that, he said, Ace is adding half a dozen workers to its current payroll of about 175, including welders and engineers.
Overall, California businesses exported $27.1 billion worth of goods in the quarter, with an array of high- and low-tech product categories seeing substantial gains.
Exports of iron and steel products jumped 60%, nuts and fruits were up 33%, and sports equipment and games rose 9%. California-made apparel was one of the few items that saw a significant decline in exports.
Across industries, one common thread tied many companies' increases in exports: China.
In the second half of last year, China became California's fourth-largest export destination, moving ahead of South Korea. The activity has since accelerated, as China's rapid industrialization and production are generating a huge appetite for commodities and consumer goods.
Analysts have raised concerns about China's overheated economy and the central government's efforts to cool things down, which some fear could lead to a broader slowing in that region and cause pain for businesses around the world. But some economists and export directors at companies don't appear to be concerned about that at the moment.
"With my fingers on the pulse right now, it's all systems go," said Robert DeMartini, general manager of the export division at Hayward Pool Products, a swimming pool equipment maker with a big plant in Pomona.
He said his company's sales to Asia in the first quarter were up 77% from a year earlier.
Other exporters in the state are benefiting from the weak dollar, which makes US goods cheaper overseas.
John Lawrence, president of Lawrence Equipment Inc., a South El Monte maker of equipment for producing tortillas and other flat breads, said the dollar's fall helped make his company's products more attractive in Europe than those of some of its rivals.
One of the biggest orders this year, he said, came from food maker General Mills Inc., which purchased a $4.2-million tortilla production system to be installed in Spain.
The company's other overseas sales this year are to Belgium, Australia, the Netherlands and, most recently, to China.
Selling tortilla-making products in China may seem a bit odd, he said.
But then again, Lawrence added, "This is a global economy."
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