Southern California’s twin ports are on track to post total exports for the year that approach the records set before the global recession, just as the region’s preeminent air freight hub — Los Angeles International Airport — is on pace to set an all-time high for outgoing cargo.
Those are good signs for the local economy, despite a less robust showing by imports, which account for the bulk of cargo traffic through the ports of Los Angeles and Long Beach. Export-driven sales growth is helping to lead the region’s rebound, experts say; overall, international trade provides work for more than 500,000 people in the Southland.
Nationally, the trade deficit narrowed more than anticipated in October, with exports jumping 3.2% and imports declining 0.5%, the Commerce Department said Friday. The trade gap fell to $38.7 billion from a revised $44.6 billion for September, well below analyst estimates for October of $43.6 billion, which suggests stronger U.S. economic growth. California exporters racked up their best October ever, according to Beacon Economics, shipping $12.91 billion in goods abroad during the month, up 16.5% from October 2009 and 1.1% better than the previous high for the month in October 2007.
Through October, the L.A. and Long Beach ports have moved 2.8 million export-carrying cargo containers, up 20% from the same period last year. If that pace continues through the end of the year, the two ports will handle about 3.4 million containers, which would rank second only to the 3.5 million moved in 2008. Imports are growing rapidly too, but both ports will fall well short of their 2007 best.
Air freight exports through LAX peaked at 457,899 U.S. tons in 2007, but the pace this year is running nearly 4% ahead of that, according to Jock O’Connell, international trade advisor for Beacon Economics.
Monetary value of exports was higher in 2007, but “the logistics industry makes money by moving weight and volume,” O’Connell said. “They make more if the tonnages are going up.”
Exporters are selling to new middle-class consumers in China, India, Indonesia, Singapore, Malaysia and other countries, said Ferdinando Guerra, an associate economist at the Los Angeles County Economic Development Corp. who focuses on international trade.
“The middle class in these countries have begun to thrive,” Guerra said. “Their countries are not really in recovery because they did not suffer as much as we did in the recession and their consumers are in a much better position overall.”
One company looking to peddle even more internationally is Diamond Head Global Corp. of Gardena, a five-employee firm that sells reinforced steel framing and related components as a safe, sturdy home-construction alternative to wood, concrete, adobe or brick.
Chief Executive Darrell M. Sabihon said his biggest sales area has been the Philippines, and now he hopes to include other parts of Asia and earthquake-torn Haiti, where poor construction methods contributed to the massive temblor damage. Sabihon said he was looking to exceed his best year of about $6 million in sales in 2008.
“We’re hopeful,” he said. “Our products are better and they save a lot of time in construction.”
Exports that originate in California are mostly high-value items, O’Connell said. In September, the most recent month for which statistics are available, California exported more than $12.3 billion to foreign markets, an increase of 19% over the year before, through its harbors and airports.
According to a UC Center Sacramento analysis of international trade data from the U.S. Commerce Department, the state’s top exports were electrical machinery; industrial machinery and computers; optical, photographic and medical equipment; and aircraft and spacecraft components.
“In terms of sheer tonnage, airborne shipments typically account for no more than 1% or 2% of international trade. So there is no question that seaports do the heavy lifting in international trade. It’s just that the cool stuff goes by air,” O’Connell said.
With the U.S. economy still sluggish and lingering high unemployment still depressing that buying urge among consumers, exports are expected to help drive the recovery among businesses in Los Angeles and Orange counties, according to a report released last week by the Institute for Economic and Environmental Studies at Cal State Fullerton.
Co-authors Mira Farka and Adrian R. Fleissig said locally based exports would help lead the economic recovery here as the “rock bottom” levels of 2009 have given way to “record growth rates in 2010.” Exports, they said, will be up 17.1% in Orange County and by 16.4% in Los Angeles and Long Beach compared with last year.
Although the amount of cargo sent out of Southern California is rising, local exporters still have a long way to go to regain the dollar volume they had before the recession, Fleissig said. After six straight years of gains in regionally based exports, which reached a value of $60 billion in 2008, exports plummeted by nearly 24% to $45.7 billion in 2009.
“We’re definitely seeing good growth this year, but it’s going to take some time to get back to where we were,” Fleissig said. “We should get there by 2012.”
Sabihon at Diamond Head Global is counting on it.
“I’ve got bids out on $50 million of potential business,” he said. “We’re hoping to get lucky.”