Global Worries Slow State Exports
Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowA report from Indiana University's Kelley School of Business shows a slowing global economy is taking a toll on the state's exports. The Indiana Business Research Center says Indiana exports totaled $34.2 billion in 2013, slightly lower than the previous year. Research Director Tim Slaper says the state is selling fewer products to countries including the United Kingdom, France and Germany. He says Indiana could help spark a rebound by providing resources to small and mid-size companies that are considering exporting for the first time.
October 28, 2014
News Release
Bloomington, Ind. — Indiana exports declined slightly last year from a record high the year before, totaling $34.2 billion in 2013, according to a new report from Indiana University's Kelley School of Business.
The same report, produced by the Indiana Business Research Center in the Kelley School of Business, also said that both the United States and other Midwestern states outperformed the Hoosier state last year. The U.S. exported nearly $1.6 trillion in goods and services in 2013.
“While Indiana turned in strong export performance and recovered quickly from the adverse effects of the Great Recession, recent anemic economic growth in the Eurozone and weaker-than-expected growth in several emerging economies put a damper on Indiana's exports in 2013,” said Timothy Slaper, research director of the IBRC and a co-author of the report.
“Most of the countries for which Indiana exports have been declining — the United Kingdom, France and Germany, for example — have been experiencing overall lackluster economic performance.”
After growing by 6.6 percent the year before, Indiana exports declined by 0.7 percent in 2013, while exports grew by 2.2 percent nationally and by 1.2 percent in the Midwest.
“Indiana hit a speed bump in 2013, ending a three-year period of solid growth,” Slaper wrote in the report, “Global Positioning: Indiana's Export Activity 2014.”
Relatively speaking, exports are more important to Indiana than other states; its dependency on exports ranks 12th nationally. Compared to Indiana’s neighboring states, only Kentucky saw more accelerated growth in exports last year.
The International Monetary Fund has predicted that world output will grow by 1.8 percent this year and 2.4 percent in 2015. However, weak economic growth is expected across much of Europe — although Germany and France likely will outperform their neighbors.
“If the weak — perhaps negative — economic growth that is expected in most of the Eurozone continues, it will reduce demand for exports, including those from Indiana,” the report said. “On the upside, Canada and Mexico are Indiana's primary markets.”
Canada remains the largest market for Indiana, accounting for 34.6 percent of the state's exports. The Hoosier state also registered a small decline in Canadian exports, 0.7 percent. Vehicles and parts remained Indiana's top exported commodity, increasing 4.2 percent from 2012 to 2013. The state also exceeded the national growth rate for vehicles and parts, industrial machinery, and plastics and related products.
Mexico comes in second place, accounting for 11.7 percent of Indiana exports. Since 2008, the average annual rate of change in state exports to the United States' southern neighbor has been 12.8 percent. Indiana exports to Mexico increased by $93 million in 2013.
“The dominance of the Canadian and Mexican markets, together with the potential for expanding to the emerging economies, may serve as a counterbalance to tepid demand for Indiana exports in Europe,” Slaper said.
Germany remains Indiana's third top destination for Hoosier goods, accounting for 5.6 percent of state exports. Japan and France followed it in the top five.
As reported last year, China continues to be an increasingly important destination for Indiana exports. Over the past 10 years, the value of Indiana exports to China has risen by 475 percent.
In recent years, there has been much reporting about the importance of economic growth in emerging markets, particularly the so-called “BRICS” nations — Brazil, Russia, India, China and South Africa. With the exception of China, these countries have not been among the top destinations for Indiana goods.
“While many look to the emerging economies for growth, there may be less potential for expanded export opportunities in the near future,” Slaper said. “The BRICS countries are, as a group, not turning in the rates of growth experienced recently.
“Trade between the U.S. and Russia may go from small to almost nil as a result of rising political tensions and the ripple effects of trade sanctions,” he added. “All that to say: export growth will not likely be the economic stimulus it was from 2010 to 2012.”
While 115 countries imported goods from Indiana in 2013, only 31 nations had export values of more than $100 million.
Also in the report:
• Pharmaceutical products continue to be Indiana's second-largest export industry and may surpass vehicles and parts as the No. 1 industry if current trends continue. The top five export destinations are Japan, the Netherlands. Germany, Italy and France.
• In terms of dollar value of export sales by state, Texas and California dominate, with exports valued at $279.5 billion and $168 billion, respectively. Indiana held its own at 13th, and only three Midwestern states exceed the Hoosier state's exports: Illinois, Michigan and Ohio. All are ahead of Wisconsin, Missouri, Kentucky, Iowa and Minnesota.
Production of this report was partially supported by the IU Center for International Business Education and Research in the Kelley School of Business.
Source: Indiana University