California Exports Climb on Strong Asia Rebound

Propelled by Asia’s economic recovery, California exports of manufactured goods rose sharply in the third quarter, the first increase in about 1 1/2 years.

California companies, led by dramatic improvements in shipments of electronics and industrial machinery, shipped $27.6 billion worth of merchandise abroad in the July-September period. That was an increase of 10.2% from the depressed levels of the year-earlier quarter, according to figures released Monday.

The third-quarter gain was bigger than analysts had expected, reflecting stronger than anticipated demand from rebounding Asian economies that just a year ago were mired in recession. Combined with robust shipments to Mexico and Canada, they more than made up for weakness in the state’s exports to Europe and South America.

Now that exports have turned positive, analysts said, California shipments overseas are likely to accelerate in the coming months.

“The third quarter was the turning point,” said Richard O’Brien, economist at Hewlett-Packard Co., the Palo Alto-based computer company. He said orders for computers and other high-tech goods were gaining steam.

And so is the number of businesspeople looking to export.

“We are seeing a pickup in interest, which I find doubly significant,” said Gladys Moreau, director of the federally backed Export Small Business Development Center in El Segundo.

The optimism portends improvements in California’s manufacturing industry, where employment has declined this year. The biggest beneficiaries will be export-leading areas such as the San Jose region and Southern California.

For example, Robert Murray, operations manager at Oxnard-based Haas Automation Inc., one of the nation’s leading machine tool makers, said his firm’s shipments to Asia climbed by 58% in the third quarter. The firm’s biggest growth market there: mainland China.

“The orders are coming in and we expect increased business,” Murray said.

California’s exports of merchandise account for more than 10% of the state’s economic output--far bigger than most other states.

As a result, said economist Ross DeVol at the Milken Institute, the growing exports should help keep California’s economy humming despite an expected slowdown in domestic demand next year.

California exports to Asia increased broadly in the quarter, with the notable exception of Japan. Shipments there continued a long decline, dipping by 6% in the latest quarter to $3.3 billion. Japan has dropped to the No. 2 spot behind Mexico among California’s export markets.

But exports to almost every other Asian country saw impressive gains. Deliveries to South Korea jumped by 74% to $1.75 billion, reflecting that country’s robust economic rebound. California exports to Taiwan surged by 55%, to $1.9 billion, and shipments to Hong Kong and mainland China also increased by more than 20%.

Overall, California shipments to Pacific Rim countries other than Japan surged by 29% to $8.8 billion. Those countries account for a third of all California exports, according to an analysis of the data by G.U. Krueger, an economist at the California Assn. of Realtors.

But Haas Automation’s Murray said his company’s sales to Europe fell by 23% in the third quarter, and he does not see a turnaround there or in South America in the near term.

California’s exports to the European Union edged up by 2% in the third quarter to $5.4 billion. Shipments to Europe also were weak earlier in the year, reflecting Europe’s economic downturn and the strong U.S. dollar, which makes American goods more expensive for buyers there.

But Europe’s economy has improved in recent months, and analysts are expecting increased demand in that region as well.

Meanwhile, California goods bound for Mexico continued to be strong, increasing by 17% in the quarter to $4.1 billion. That came despite fears that economic weakness in Brazil and some other South American countries would infect Mexico’s economy.

Shipments of electronic equipment, computers and industrial machinery--which account for more than half of all California exports--rose by about 15% in the latest quarter. Farm goods rose by 19%, although shipments of processed food products continued to be weak.

Other commodities, including lumber and scrap and waste, also saw strong gains in the quarter. The one weak export category was furniture; exports of those goods fell by 23% to $77 million.

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Back to Asia

With Asia’s recovery in full swing, California’s total exports rose for the first time in about a year and a half, to $27.6 billion. Quarterly percentage changes from a year earlier:

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Third quarter

1999: +10.2%

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Source: Massachusetts Institute for Social and Economic Research