County-Level Performance 3rd Quarter 2013

Tables and Graphs

---

Assessing the impact of the recent global financial crash across counties

In the last issue we looked at the pattern of exports across Tennessee’s counties. We continue that exploration by placing county exports in the context of the county’s total economic activity and then assessing the impact of the recent global financial crash across counties. The crash produced a steep decline in global exports followed by an equally steep recovery. How did this affect county-level exports in the state?

A handful of counties dominate both state production and state export figures. In 2010, five counties accounted for half of Tennessee’s total production. The same five also produced half of the state’s exports (though not ranked in the same order). It is interesting to note the relative “export deficit” of Davidson County, which produces four-fifths the amount of goods and services that Shelby County produces but only half of the exports. Rutherford and Anderson stand out as particularly export-focused among the state’s large counties.

If we examine counties, however, not simply by their size but by their export intensity, we see a different picture. Export intensity here means the value of a county’s exports as a percentage of the total value of goods and services it produces. In 25 of the state’s 95 counties, 10% or more of total county production is exported. In 2010, Sequatchie County, it turns out, had a larger percentage of its production going abroad than did any other. Van Buren and Maury counties also exported more than one-fifth of their total production. None of the state’s largest counties, whether measured by population, total production, or total exports also appear on the list of the most export-intensive counties. The closest would be Rutherford County (12.01%). The majority of export-intensive counties are rural counties with relatively small economies. These counties are typically dominated by several large business establishments that export substantially. Dyer County, for example, is quite export-intensive, but two plants account for nearly one-quarter of all its exports while seven plants account for about half. In next-door Obion County, two plants produce one-third of the county’s exports. So the most export-intensive economies tend to be those reliant on a handful of firms for most of their production.

Mapping the state’s counties by their export intensity reveals an interesting picture. West Tennessee is clearly the most export-intensive region of the state. This may surprise until we remember that many of these counties have relatively small economies. Though one might be tempted to think this might also reflect heavy agricultural exports, this is not true. Agriculture accounts for more than half of all exports in only two Tennessee counties, Hancock and Hawkins, both in east Tennessee. (By dollar value, the state’s heaviest agricultural exporter is Greene County, also in the eastern part of the state.)

Recent Changes

The past few years were a wild ride for exporters. Tennessee lost more than 10% of its exports in the wake of the 2008 global financial crisis. It then regained them and more, with exports rising almost 25% between 2009 and 2010. However, this crash and quick rebound did not play out the same everywhere. On one hand, Tennessee’s statewide export intensity increased in the wake of the collapse and boom. The state’s export intensity was 20% higher in 2010 than it was in 2008. The number of counties that exported 10% or more of their total production also increased from 10 in 2008 to 25 two years later. But against this, almost one-third of the state’s counties saw their export intensity fall, and exports from 32 counties actually declined over this period, even with state exports growing robustly.

The map of county export gains, though, does not reveal any obvious patterns in this county performance. We note that many of the state’s largest counties (by population or economic activity) were among those that lost exports over this period. Davidson and Hamilton counties were the exceptions. By the same token, the state’s most service-oriented counties (Williamson, Anderson, and Sevier, along with Shelby and Davidson) also exported less in 2010 than in 2008, with Davidson again the exception. The gainers were largely more rural counties. In an irony, it was often the same counties devastated by trade-related plant closures over the past several decades that saw the largest export growth coming out of the crash. In most of these counties export growth surged ahead of total economic growth. In 45 state counties, in fact, exports grew even as the entire county economy shrank.

Changes in county-level export intensity support the view that the quickest export turnarounds were across the state’s smaller counties. For these (usually) poorer counties, the ability to take advantage of world markets likely moderated the domestic impact of the economic slowdown. One doesn’t often think of exporting as a hedge against declining domestic economic activity, but that was the situation for a number of Tennessee counties in the 2008-2010 period.

A second observable pattern here is the relative export success of the Chattanooga metro area. Most counties in the Chattanooga region increased both their exports and their export intensity over the 2008-2010 period. The cluster of increased export intensity in the outer rings of the Nashville metro area also points to the continuing importance of auto parts manufacturing in the state’s export picture.

The recent pattern of county exporting in Tennessee is a little bit surprising. In general, the relative export performance of smaller counties has exceeded that of the state’s major economic centers. This may be because the pattern of fewer but bigger exporting establishments that is more typical of rural counties was the most responsive to the rapid changes of a gyrating world economy and the first to take advantage of renewed global opportunities. In the next issue, we will look at county exporting patterns over a much longer period and see whether the past several years have been an anomaly.

Tennessee International Trade Report

Tennessee saw its slowest export growth since the 2009 global financial crisis.

Third quarter trade statistics provide more evidence of a slowing global economy. At $7.729 billion, Tennessee exports were up just 3.5%, their slowest growth since the 2009 global financial crisis. Nevertheless, this well exceeded national performance. Total American exports gained a meager 1.2% for the quarter as 24 states actually saw their exports fall. Tennessee ranked 22nd among the American states in export performance. Many of the strongest states were those with significant exports in the energy sector.

Tennessee was carried by strong performances in several sectors. Automotive-related exports turned in another good quarter. Car ($212 million to $361 million) and truck ($31 million to $50 million) exports were robust, though auto parts were basically flat ($405 million to $407 million). A number of ancillary products, such as tires, engines, pumps, generators, and automotive instruments, also had good quarters, each with double-digit gains in foreign shipments. Since many of these products are ultimately destined for vehicles sold in the U.S., these solid numbers in general speak more to the relative health of the American economy than to the global export environment. However, the state’s major non-North American auto market, the Gulf States of the Middle East, was one of the quarter’s few dynamic regions. Car exports to the Gulf more than doubled, accounting for over one-third of Tennessee’s motor vehicle exports for the quarter. Also in the transportation sector, aircraft-related foreign sales were strong, up almost 25% for the quarter.

Medical instrument exports performed well. The sector gained 11.8% for the quarter, to $643 million, mostly on the back of increased shipments to Japan and other East Asian countries. European purchases, too, were up 10%. Most other medical-related products, though, such as orthopedics or pharmaceuticals, did not have the same success for the quarter and were lucky to hold steady from a year ago. The computer sector joined medical instruments in the winner’s circle. Its 16% export growth (to $444 million) compared favorably to that of most other industries. Substantial gains in China and Europe overcame weaker numbers in Latin America and a slowdown in the Canadian market.

Other strong industries for the quarter included artificial filament, with a $30 million gain due to increased exports to China, South Asia, and Vietnam, wood products (up $10 million), and paper products (up $19 million). Chemicals were a mixed bag. Overall the sector’s exports fell 3.8%. The drop, however, was concentrated in several products, notably coloring matter and polyamides. The $79 million drop in coloring matter shipments was one of the largest of any exported product. Exports were down globally, with shipments declining to South Korea, Taiwan, the euro zone, and South America. Exports of polyamides fell 45.7%, the losses coming mostly in East and Southeast Asia. Inorganic chemicals as a whole, on the other hand, posted a decent gain for the quarter ($103 million to $117 million), and cyanides, polyesters, and cellulose-based chemicals were among those that did quite well.

A number of sectors did not fare particularly well, as the state’s overall mediocre performance would suggest. These included several industries that have long been important to the state, including cotton, whiskey, and aluminum products. Cotton (and cotton yarn) exports fell to $178 million, suffering losses notably in Mexico, Southeast Asia, and Turkey. The state’s whiskey industry has shrugged off economic slowdowns in the past but does not seem to be having the same luck this time around. Whiskey exports fell $22 million (-12.4%) last quarter. Apparently the austerity measures in Europe are clipping whiskey sales, for that is where the losses are concentrated. The state’s aluminum industry also did not fare well, with shipments of aluminum plating down 35% (to $62 million) and exports of aluminum waste off 52% (to $11 million). Losses in the former were mostly in Mexico, while decreased sales to China account for the latter.

Significant export losses came from two small sectors. “Special purpose vehicle” exports crashed, falling from $64 million to $2 million for the quarter. These vehicles were going to Afghanistan, giving an idea of their special purpose. Snowplow exports, of all things, had a terrible quarter, with foreign sales melting from $21 million to just $2 million. As perhaps might be expected, Canada is the big market here.

Geographically, the biggest story of the quarter is the slowing of the NAFTA region. For the past several quarters, Tennessee has relied on Mexico and Canada for much of its export growth even as the rest of the world was clearly slowing down. But in the third quarter, state exports to Canada grew just 2.4% while those to Mexico inched up 2.65%. Both these performances fell below the state’s overall export growth rate, an unusual occurrence. South America was flat: Tennessee exports eked out a $10 million gain, with Brazil, Chile, and Peru up and almost every other country down. Southeast Asia exactly countered that small gain with its own $10 million loss. Though Singapore substantially increased its imports of Tennessee goods (mostly medical instruments), it was more than countered by large declines in Indonesia and the Philippines. East Asia was somewhat better, thanks to a 10% gain in China (computers, aircraft, artificial filament) and a 5% gain in Japan (medical instruments, semiconductor devices). Exports to Europe were virtually unchanged from a year ago. Shipments to the euro zone actually increased just under 4% for the quarter, but they were balanced by small losses in the United Kingdom and the other non-E.U. states. Germany, the Netherlands, and Italy were the best markets on the continent, each upping its purchases of Tennessee goods by 6% or more. The Italian gains were entirely because of one product, scrap containing precious metals.

The Gulf region of the Middle East was by far Tennessee’s best export market for the quarter. It is a concentrated market, with almost two-thirds of its purchases cars or aircraft equipment, but it is growing robustly. At $350 million, state exports to this region are $130 million higher than a year ago. It accounted for exactly half of the state’s global export gains.

In the previous Global Commerce, we commented on the narrowing base of the state’s continuing export gains. This quarter we have seen it narrow even further. October 2012 exports came in at $150 million less than a year ago, promising bleaker news ahead. Tennessee exporters likely will have to see an improving world economy before export figures will return to the path of the past several years.