Asia Helps State Exports Show Signs of Recovery : Trade: Drop-off is narrowing as countries bounce back. For the first time, Mexico replaces Japan as California’s No. 1 customer.
Reflecting Asia’s astonishing comeback, California exports to the region in the second quarter showed the first clear signs of a broad recovery. And for the first time, Mexico overtook Japan to become California’s top export destination.
On the whole, the value of California’s exports still declined in the second quarter from the same period a year ago, according to data released Tuesday by the Massachusetts Institute for Social and Economic Research. But the drop-off was considerably less than in previous quarters, just 1.5% this time, and that was largely due to persistent sluggishness in Japan and a dip in shipments to Europe.
But California exports to Mexico bounced back in the April-June period, and with much of Asia now in recovery, economists said it will not be long before California exports overall turn positive once again. For all of last year, merchandise shipments abroad were off 4%, and shipments declined 7% early this year, in what now appears to have been the bottom of the state’s 1 1/2-year slide in exports.
In the latest quarter, California’s shipments of electronic equipment and computers rebounded nicely, although exports of food products and California-made furniture softened.
“When you put the whole picture together, exports should improve in the second half of the year,” said Sheldon Engler of San Francisco economic consulting firm Engler & Davis. The improving orders abroad, he said, couldn’t come at a better time, because rising interest rates are threatening to slow domestic spending and economic growth. Exports will “provide a cushion,” he said.
Early this year, South Korea was the first major export country to bounce back, and California shipments there rose 37% in the second quarter. The picture improved in two other Asian tigers: Exports to Taiwan were up 19%, a reversal from a quarter ago; and Singapore also turned positive from sharp export drops early this year and last.
“It certainly has picked up,” said Willy Fong, export manager at Hirsch Pipe & Supply Co. in Van Nuys. Fong estimated that orders to Asia rose by 10% to 20% in the last two months. “I’m optimistic,” he said.
Still, the one lingering weakness in Asia is Japan, now California’s No. 2 export country. Shipments there fell by 12% in the second quarter after a decline of 10% in the first quarter and a drop of 16% last year. Although economists see the possibility of gradual improvement there, businesspeople were less sanguine.
“There’s no light of day in Japan,” said Anthony Munoz, director of international operations at American Racing Equipment, a Rancho Dominguez maker of wheels. He said, however, that sales to other parts of Asia and to Australia and New Zealand have increased.
California’s exports to Mexico also showed marked improvement after two quarters of sluggish performance, increasing 7% to $3.5 billion. That put Mexico ahead of Japan, where exports totaled $3.3 billion. Analysts said they expect orders to Mexico to continue to bounce back, although they were less hopeful about shipments to other Latin American countries.
In all, California exports totaled $25.4 billion in the second quarter, putting it on pace to exceed $100 billion this year. California is the nation’s leading exporter, and merchandise shipments account for more than 10% of the state’s economic growth.
Economists said exports will play a more vital role in sustaining that growth next year. The European market is coming back, and demand from Asia is only expected to get better.
“A lot of things seem to be straightening themselves out,” said Ted Gibson, an economist at the state Department of Finance. “It looks like 2000 could be a good one.”
