Decline in Canadian demand pulls down total exports

Indicators that gauge current economic conditions around the globe continue to be very strong despite recent turmoil in the Middle East and rising oil prices. Foreign consumers and businesses are on a spending spree that has boosted purchases of goods made in their countries and abroad.

Simply put, good economic conditions in foreign countries lead to growing demand for American goods in general and goods made in Vermont in particular. In addition, the low value of the dollar, which makes domestic goods cheaper for foreign buyers, has contributed to strong foreign demand enjoyed by Vermont's exporting companies.

However, the favorable international economic environment was not fully translated to good news for Vermont's exporters and jobs. Exports to Canada, the destination of one half of all the state's exports, have declined 26 percent in the first half of 2006 from the same period in 2005.

Integrated circuits account for 70 percent of all goods Canadians buy from Vermont. In the first six months of 2006, exports of integrated circuits to Canada have dropped 35 percent cornpared to the first six months in 2005. The weakening of Canadian demand for integrated circuits is the major cause of the recent decline in Vermont's overall exports.
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In the wake of falling Canadian demand, foreign sales of made-in-Vermont goods dropped $14.8 million or 4.7 percent in June, after gaining 3.2 percent in May, The latest monthly drop brought state exports to $302.4 million, adjusted for seasonal variation - a statistical technique that smoothes out monthly fluctuations for factors such as the number of working days in a month and thus gives a clear picture of monthly trends similar to the national trade numbers.

Compared with last year, June's reading in state exports shows that Vermont's companies did not post gains in selling their goods overseas. In June of this year, exporters shipped abroad $69.6 million, or 18.7 percent, less goods than in June of 2005.

The June snapshot of Vermont's international trade numbers reflect a blend of different trends in foreign demand for the state's major exporting industries. Sales abroad of manufactured goods - the foreign engine of state economic development and a key generator of jobs - accounted for 5 7 percent of all exports in June.

Manufacturer's foreign shipments from Vermont companies dropped in June by 12.9 percent from the previous month to $172.7 million, adjusted for seasonal variation.

Compared with June of last year, the latest volume of shipments abroad from state factories was $100.8 million lower. This is important news for the Green Mountain State as the industrial mix of state exports of manufactures implies that one in every 3 local factory jobs is tied to exports.

Also, manufacturing activity sustains jobs in a wide range of other industries. A good example is the transportation of raw materials and final goods to and from state factories that are doing business overseas.

As a result, for every 100 jobs tied to June's exports of manufactured goods, there were another 232 supporting jobs in non-manufacturing industries, mainly wholesale and retail trade, transportation, business services and to a lesser degree utilities, mining and agriculture.

Exports of non-manufactured goods totaled $129.6 million in June, a 9.1 percent increase from May. This group of shipments abroad consists of agricultural goods, mining products, and re-exports which are foreign goods that entered Vermont as imports and are exported in substantially the same condition as when imported.

At the national level, exports of goods advanced 3 percent in June to a record $96.6 billion, adjusted for seasonal variation, from May, mainly reflecting solid gains in sales of capital goods, industrial supplies and agricultural products.

The recent performance in national exports was a major contributor to GDP growth the nation's output of goods and services - in the first half of 2006. In the first six months of the year, US exports hit nearly half of a trillion dollar mark, a 14 percent surge from the same period in 2005.

How did Vermont's companies fare in export growth through the first half of this year, which in turn impacts jobs and economic development in the state? Vermont ranked forty seventh-in export growth among the fifty states during the first six months of the year. Particularly, in comparison with the first six months of 2005, foreign sales from Vermont's companies, seasonally adjusted, decreased by an annual rate of 3.6 percent.