Falling Dollar = More Exports

This chart shows the value of the dollar in relation to the Euro against outbound TEU's (Twenty-foot Equivalent Unit containers) from the port of Los Angeles / Long Beach.

The Euro has been gaining strength while the dollar has been falling over the past year. When the Euro was first introduced in 2001, it was trading at roughly equal to that of the dollar, you could get a Euro for 94 cents. As of February 2008, it takes $1.48 to buy a Euro, a 57% increase in the price in just seven years.

Not all is doom and gloom; as the dollar declines American exports begin to look like bargains to consumers overseas. Likewise, the amount of American exports from Los Angeles / Long Beach has increased over this time period.

The joke used to be that the greatest American export was outbound empty containers. There was some truth to this argument.

It was easier and cheaper to create new containers in China and ship them to the United States rather than wait for empty containers to make their way back to the mainland.

This is no longer the case, the balance between outbound traffic and inbound traffic is starting to stabilize, due to decreases in inbound traffic and increases in outbound traffic.

Sign of the Times - Asian exports shifting to new markets

From Financial Times:

Asian exports shifting to new markets
By Raphael Minder in Hong Kong

Published: April 1 2008 05:33 Last updated: April 1 2008 17:13

East Asian nations are successfully shifting exports away from the US to other developing countries, Europe and oil-rich markets in the Middle East, the World Bank said on Tuesday.

Whether Asia’s many export-driven economies would be able to reduce their reliance on the US, traditionally their biggest market, has driven much of the recent debate over the global impact of a US slowdown

But Vikram Nehru, the World Bank’s chief economist for east Asia and the Pacific, which excludes Japan and Australia, said on Tuesday the shift was taking place faster than expected. “I didn’t expect such a rapid shift towards non-US markets as we are seeing,” he told the Financial Times. “That is a sign of very adept marketing, as exchange rates and incentives change.”
Mr Nehru said east Asian exporters had been nimbly using their currency positioning “somewhere in the middle” between a falling dollar and a rising euro, with the eurozone now a more attractive target for their shipments.

While annual export growth from emerging east Asian nations initially slowed from 22 per cent in January of last year to 15-16 per cent in the third quarter, it has since rebounded to 18-19 per cent.

The World Bank also said more sophisticated domestic production was allowing China to source more of its input needs internally.

“If this trend continues and if other east Asian economies are able to exploit these new opportunities in China’s domestic market then, over time, China is also likely to become an increasingly independent growth pole for the rest of east Asia,’’ the bank said.
South Korea on Tuesday reported that exports in March rose at their fastest annual pace in five months. The stronger than expected trade figures prompted Goldman Sachs to raise its exports growth forecast for South Korea this year to 10 per cent from 9.8 per cent, “on the back of a weaker Korean won and ongoing export diversification”.

Still, the World Bank lowered its 2008 regional growth forecast to 7.3 per cent, compared with a previous estimate of 8.2 per cent, amid a global economic slowdown. East Asian growth is expected to be 7.4 per cent in 2009.

Strong fiscal positions and foreign exchange reserves gave most east Asian countries the means to stimulate their economies by offering tax incentives and other measures if a global slowdown became more pronounced, the bank said.

However, it warned that rising inflation posed a more immediate threat to east Asian countries than a slowdown or any further credit squeeze linked to the collapsed US subprime market. “In virtually every east Asian country, inflation is climbing to uncomfortable levels while monetary and credit growth is difficult to contain owing to substantial capital inflows.’’

South Korea and Indonesia on Tuesday both reported higher than expected inflation data.
Indonesia’s annual inflation rate accelerated to 8.2 per cent, its highest level since September 2006, while South Korean consumer prices in March rose 3.9 per cent to match a three-year high set in January. Asian countries already struggling with double-digit inflation include Cambodia, Vietnam and Sri Lanka.

Vikram Nehru, the World Bank’s chief economist for East Asia and the Pacific, said in an interview: ”I didn’t expect such a rapid shift towards non-US markets as we are seeing. That is a sign of very adept marketing, as exchange rates and incentives change.”
Mr Nehru said East Asian exporters had adjusted well to their currency positioning ”somewhere in the middle” between a falling dollar and a rising euro, which is making European markets more attractive.

While annual export growth from emerging East Asian nations slowed from 22 per cent in January of last year to between 15 and 16 per cent in the third quarter, it has since rebounded to between 18 and 19 per cent.

The World Bank also highlighted the extent to which more sophisticated domestic production is allowing China to source more of its input needs internally. ”If this trend continues and if other East Asian economies are able to exploit these new opportunities in China’s domestic market then, over time, China is also likely to become an increasingly independent growth pole for the rest of East Asia,’’ according to the World Bank’s latest regional report. ”The character of intra-East Asian trade flows is likely to undergo structural change over time.”

Confirming the resilience of exports from the region, South Korea on Tuesday reported that exports in March rose at their fastest annual pace in five months. The stronger-than-expected trade figures prompted Goldman Sachs to raise its export growth forecast for South Korea this year to 10 per cent from 9.8 per cent, ”on the back of a weaker Korean won and ongoing export diversification.”

Still, the World Bank on Tuesday lowered its 2008 growth forecast for the region, which excludes Japan and the Indian subcontinent, to 7.3 per cent, down from the 8.2 per cent level predicted last November. It said east Asian growth should reach 7.4 per cent in 2009.
The Korean trade data indicated that exports to the US remained surprisingly robust, a key consideration for the country’s technology companies. In its report, the World Bank said that world demand is ”likely to be reflected in weaker East Asian export growth in the coming months.”

”However there is little in the data so far to suggest a steep high-tech-led downturn of the 2001 type,” it said.

A strong fiscal position and high foreign exchange reserves could also give most East Asian countries the means to stimulate their economies with one-shot measures such as tax relief if the economic slowdown becomes more pronounced, the bank said.

The World Bank warned that inflation was a more immediate threat to East Asian countries than the global slowdown or a further credit squeeze linked to the collapse of the US subprime market. ``In virtually every East Asian country, inflation is climbing to uncomfortable levels while monetary and credit growth is difficult to contain owing to substantial capital inflows.’’

My Take: This is bad news for the Inland Empire since a good portion of our warehouse strength came from Asian imports. If China can easily substitute out of the United States and into the Euro-zone, then we would be hit a lot harder than if the option didn't exist; the Chinese would trade with the United States even if it was slightly unprofitable for them, since they had no one else to trade with. But they do have others to trade with and a strong Euro buys a lot more goods than a falling dollar. So it seems we should not pity the Chinese manufacturer just yet.

Texas Takes Lead As Nations Top Exporter

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Texas! Only steers and American exports come from Texas, Private Cowboy.

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From LAEDC :

Texas Takes Lead as Nation’s Top Exporter

The national export figures released on Friday by the Bureau of Economic Analysis (BEA) revealed a change in the top exporter. For the first time since the U.S. Principal Parties of Interest (USPPI) series has been in circulation (January 2006) California did NOT lead the nation in total exports. Instead, Texas ($11.688 billion) claimed that honor exporting $3.5 million more than California ($11.684 billion). California exports continued to grow, as year-over-year comparisons revealed an increase of +5.0%. Texas’ total exports increased by +13.5% during that same time. This reflects the national trend as total U.S. exports increased by +15.8% since January 2007. Texas was able to overtake California as top exporter by exporting significantly more manufactured goods. California ($8.2 billion) exported -7.8% fewer manufactured goods compared to a year earlier, while Texas ($9.7 billion) saw a +3.0% increase. Using the BEA’s Origin of Movement (OM) series, Texas again led the nation in January with $15.2 billion in total exports, a year-over-year increase of +14.5%. During that same period, California saw its total exports increase by 6.0% to $11.0 billion. The difference again came in the export of manufactured goods as Texas exported $4.6 billion more than California. California’s export of manufactured goods increased by +2.4% year-over-year to $7.8 billion, while Texas exploded over that same period with a +15.7% increase to $12.5 billion. Nationally, U.S. exports of manufactured goods decreased by -2.6%, while total exports decreased by -2.4%.
State export data by commodity are not available by USSPI. However, commodity data is available for OM state export figures. Both California and Texas exports benefited from high world prices for agricultural and energy-related products. Dairy and oil products reported the biggest year-over-year growth for California OM exports (increasing by +208.4% and +182.5% respectively), while aircraft had the largest negative impact (with a -25.3% decrease). Cereals, oil products, and optical & medical equipment contributed the most to the year-over-year growth in Texas OM exports (rising by +95.5%, +66.6%, and +42.3% respectively).The USPPI measure allocates export trade value according to the location of companies having the greatest economic interest in an international transaction, while OM measures trade values at the point where international shipments begin, often at consolidation points near border crossings or other ports of exit. With its long border with Mexico, Texas is home to numerous international border crossings and warehousing facilities, as well as major rail links between the United States and Mexico. Industry observers believe that many shipments originating in other states (including California) are credited with Texas exports to Mexico under the OM state export series. (April Lisonbee & Eduardo J. Martinez)

My Take:

Imports are a key source of growth for the Inland Empire and the Ports of Los Angeles / Long Beach is the entry point for imported Asian goods. Unfortunately, now is not a particularly attractive time to import goods into the United States.

The dollar is at a low point, it doesn't buy as much as it used to. This is good for exporters and bad for importers.

The economy isn't as strong as it used to be. As consumers cut back on their purchases it is likely to have a negative impact on importers.

For these reasons we can expect to see less activity at the ports and that will invariably have a trickle down effect for industrial space in the Inland Empire.