Economy Matters

photo credit: Georgia Ports Authority

On a rainy June day in 2013, dignitaries gathered at the Port of Savannah to welcome distinguished arrivals from overseas. Laboring upriver was a cargo ship laden with what looked like gargantuan, skeletal birds: four "super post-Panamax" cranes for loading and unloading ships. Each stands nearly 200 feet tall, with a wing span of 400-plus feet so as to reach across today's seagoing behemoths.

The cranes are needed as ports vie to attract massive vessels that traverse the soon-to-be expanded Panama Canal. At the Georgia facility and other seaports and airports across the Southeast, an elaborate logistical dance of ships, boxes, cranes, planes, trains, and trucks hums around the clock.

You wouldn't know it from online videos or by observing portside. But goods exports from the Southeast—and the United States overall—are off in 2015 compared with last year. To be sure, export business in these parts is brisk by historical standards, as global trade burst out all over the Southeast following the Great Recession. However, export momentum has slowed, thanks largely to a global economic slowdown and an appreciating U.S. dollar, which makes American goods more expensive overseas.

In the Southeast—the six states that make up the Atlanta Fed's District—combined exports of goods through the first half of 2015 fell 8 percent from the same time last year, to $103 billion, according to data from the International Trade Administration (ITA), part of the U.S. Department of Commerce. Nationally, exports were off 5 percent in dollar value (see the chart). This drop comes after Southeast exports were essentially flat the previous three years. But that fallow period followed a 66 percent rise from the first six months of 2009 to the corresponding period of 2012.

Amid a strengthening U.S. economy, sluggish exports are a concern to Federal Reserve officials. During an October 9 speech, Atlanta Fed President Dennis Lockhart cited data on net exports among factors that signal some economic weakness as the Federal Open Market Committee contemplates whether to raise the federal funds rate target. (Lockhart this year is a voting member of the committee, which meets again in December.)

In recent months, Atlanta Fed officials have begun hearing diverging stories from business contacts in the Southeast (click below to see a list of the Southeast's biggest-exporting metropolitan statistical areas). The story, boiled down: the domestic market is strong but the international economy is difficult.

Tough to untangle effects of rising dollar, global slowdown

A stronger dollar and weaker foreign economies are clearly pinching exports. Beyond that, though, it's difficult to separate precisely how much of the pressure on exports is the result of the dollar and how much can be attributed to slowing global growth, says Galina Alexeenko, a director in the Atlanta Fed's Regional Economic Information Network who follows global business.

It is likewise tricky to view exports only in terms of the dollar value of goods shipped. A drop in the prices of particular commodities—think petroleum products—can mean lower exports by value, even if the actual volume shipped might not have decreased much. For example, although goods exports nationally were lower in dollar terms during the first half of the year, by volume they were actually up 1 percent.

In the Southeast, Louisiana accounted for the bulk of the region's decline in exports in the first half of 2015. The state's exports were down $7.7 billion, or 24 percent, from the same period a year earlier, according to ITA figures.

However, the volume of cargo that Louisiana's ports are shipping out does not appear to be down substantially. To be clear, these ports export goods from states other than just Louisiana, and some exports made, grown, or mined in the state are shipped from ports elsewhere.

Galina Alexeenko, a director in the Atlanta Fed's Regional Economic Information Network

photo credit: Odie Swanegan

But the Port of South Louisiana and the Port of New Orleans are among the nation's busiest. The Port of South Louisiana reports that its exports by tonnage were off just 3.5 percent through the first nine months of 2015, compared with the same period in 2014. Meanwhile, the Port of New Orleans's container export volumes increased through September compared with last year, but exports of goods that must be loaded individually—"break bulk" cargo—declined by about 12 percent.

Similarly, Georgia's ports have also seen export volumes decline, but just slightly. The Georgia Ports Authority's numbers show container exports, mainly from the Port of Savannah, were 2 percent lower through the first nine months of 2015 compared with the same period last year.

Value and volume may not always precisely align. Still, in a macroeconomic sense, value is important, as dollars flow into personal incomes and company coffers, Alexeenko says.

United States, Southeast somewhat insulated from global weakness

Even though international trade is large, by global standards, exports are a comparatively small part of the U.S. economy. Goods exports account for about 10 percent of U.S. gross domestic product, compared with, for example, 23 percent for China and 46 percent for Germany, according to the World Bank.

The United States is less dependent on selling abroad mainly because of its large, dynamic domestic consumer marketplace, Alexeenko says. And like the United States as a whole, Southeast states are somewhat insulated from global economic forces. Exports equal 7 to 11 percent of gross state products (GSP) for the Southeast states, according to U.S. Bureau of Economic Analysis data on GSP and ITA figures on exports. The outlier is Louisiana, a prolific exporter of petroleum products and agricultural commodities such as soybeans, corn, and wheat. In 2014, exports equaled about a quarter of Louisiana's economic output.

China, South America, Europe buying less

Whatever the precise reasons for the slowdown in exports, it is reasonably clear which foreign customers are spending less: China, South America, and Europe. Through the first half of this year, the value of exports from the Southeast to those three regions was down 13, 10 and 8 percent, respectively, from the same period in 2014, according to the ITA.

China's economic troubles are understandably well chronicled. After all, it's the world's second-largest economy. But other regions including Canada, Mexico, South America, and Europe are bigger export markets for Southeast states.

There's good news there. In dollar terms, southeastern exports to Mexico during the first six months of 2015 were up slightly over 2014 levels, and shipments to Canada were off just 3 percent.

U.S. trade with our two next-door neighbors is nuanced. A substantial share of exports to Canada and Mexico are "round-trip trade," Alexeenko says, meaning that, for example, an American firm ships auto parts across the border, and those parts are used to assemble a car, which is then shipped back to the United States for final sale.

This pattern means that exports to Canada and Mexico generally depend less on the economic strength of the trading partners than do American exports to most other countries.

Charles Davidson

Staff writer for Economy Matters