Tennessee Trade Report 1st Quarter 2018

Tables and Graphs

Tennessee ranked 48th among the 50 states in export performance for the first quarter.

The year 2018 began on a very sour note. Tennessee’s foreign shipments fell from $8.129 billion in the first quarter of 2017 to $7.949 billion in 2018. This was a drop of 2.2 percent, compared to a national gain of 8 percent. In fact, Tennessee was 48th of the 50 states in export performance. Only Michigan and Hawaii had worse quarters. What happened?

In a word, computers. Exports of computers dropped over $250 million from 2017. This was a 60 percent loss. Laptops were off by nearly $100 million, and larger computers declined by about the same amount. These losses were entirely in Canada. (In fact, computer exports were up modestly to the rest of the world.) Growth in other exports north of the border came nowhere near to making up the nearly $300 million loss in computer shipments and led to a near double-digit fall in the quarter’s exports to Canada. The substantial decline in computers actually began last December, but this was the first quarter for which the fall clearly showed in the statistics.

Another large state export sector, medical instruments, also fared poorly. Its exports declined from $726 million to $662 million. This industry experienced a drop in all three of its largest markets, Europe, Japan, and China.
The auto industry was a wash. Car shipments were up; auto parts were down. Automotive engines, in particular, suffered a substantial decline in shipments. The increased car sales were in Canada. Russia and China both imported substantially more cars than a year previously! Those to China were electric. Even when it came to automobiles, though, it wasn’t all good news. Automobile sales were off sharply in Australia and Korea. The losses in auto parts were primarily in Mexico and Spain.

That’s the bad news. Several industries forged ahead. Cell phone equipment gained, cotton gained, and export of waste and scrap metal also posted strong numbers. The latter was almost entirely to Italy.

Globally, we have seen trouble in the NAFTA market. The $250 million loss in Canada combined with a $150 million loss in Mexico to just about guarantee a bad quarter for the state. Tennessee relies too heavily on these two markets to succeed without them.

Outside of North America, things were much better. The euro zone was down slightly. The biggest problem was a decline in silicon exports to Germany, but most other exported goods at least held their own. The U.K. was better, though it had to overcome a $16 million loss in whiskey sales. Exports to Great Britain rose to $262 million, a 10.5 percent increase. Gains in aircraft, medical instrument, and electric motor parts enabled this performance.

Central and South America provided needed good news. Though the Central American market is still pretty small, Tennessee exports grew by one-quarter (to $126 million) on the back of increases in cotton, yarn, and kraft paper shipments. South American exports gained almost $100 million. However, this is mostly the result of a large sale of aircraft to Argentina.

Finally, Asia. China was one of Tennessee’s best markets, growing $100 million to $626 million for the first quarter. Quite a number of sectors shared in this growth. Hong Kong also grew strongly as the main destination for the state’s growing cell phone industry exports. However, the rest of Asia was largely negative. Singapore and Japan were down modestly, while India and South Korea were both down well over 20 percent. (Pakistan, though, was one of the best markets for the quarter, thanks to a large purchase of cotton.)

Looking forward, we presume the sharp fall in computer exports is a supply chain issue. Thus, we expect large losses in this sector to be seen for most of the year. This is going to drag down the state’s export numbers regardless of how its other export sectors do. With that in mind, we will underplay this industry in coming trade reports and pay greater attention to performance elsewhere.

We presume the sharp fall in computer exports is a supply chain issue and expect large losses in this sector for most of the year.