Integrated circuits led exports in May

Vermont Business Magazine, Aug 01, 2005 by Simos, Evangelos Otto

Merchandise exports are a vital part of Vermont's production activities and therefore influence overall state economic development and jobs.

The state's economic prospects continued to look lively as international trade data showed that exports are holding up at high levels despite a recent pullback which translates to encouraging news for export-supporting local jobs. As the global economy is growing, consumers and businesses in overseas markets have maintained a strong appetite for goods made in Vermont.

Following a monthly drop of 3.8 percent in April, exports of goods from the Green Mountain State declined again in May by 10.9 percent to $318.6 million, adjusted for seasonal variation - a statistical process that smooths monthly performance for factors such as the number of days in a month and holidays. It was a natural pull back from the high levels in the previous two months when state exports hit their highest marks in three years.

Compared to a year ago, the latest snapshot in foreign sales reveals that Vermont's exporting companies surpassed their performance in 2004. In May of this year, state exporters shipped abroad $45.4 million, or 16.6 percent, more goods than in May of last year.

At the national level, US exports of goods, seasonally adjusted, were almost flat edging slightly down by 0.1 percent to $74.5 billion in May from $74.6 million in April which had been the highest level on record. The latest near record performance in national exports reflected increases in sales of consumer goods and industrial supplies as well as exports of foods, feeds and beverages, which all hit an alltime high.

State manufacturing companies were a major contributor to Vermont's trade performance. Five exporting industries accounted for ninety percent to all state exports in May.

Electrical equipment - mainly integrated circuits - was the state's largest export earner generating $246 million in foreign sales in May. They contributed 79 percent to all foreign sales climbing by 21.4 percent from a year ago.

Machinery was the state's second largest exporting industry creating $6 million of export revenues. Medical instruments, wood products and fire arms followed in the list of the top five exporting industries.

The dominance of manufactured goods in the state's exports provides a momentous source of export-related jobs. There is a fundamental link between state exports of manufactured goods and export-related jobs in the Green Mountain State. Infometrica, Inc gauges monthly the relation between state exports, jobs and economic activity by tracking the historical links of incomes, production, jobs, industrial mix, productivity, competitiveness as well as trends in and composition of international sales.

May's foreign sales from Vermont's manufacturing plants supported a total of 17.8 thousand factory jobs. Job creation in the state's manufacturing industries consists of employment generated directly from the production of the exported goods as well as indirectly from employment in supporting industries which supply exporting companies with parts, tools and equipment needed by the exporters.

In May, 10.4 thousand manufacturing jobs in Vermont were directly tied to exports and another 7.4 thousand jobs were indirectly supported by exports of manufactured goods.

More important, manufacturing production sparks off ripple effects in other industries. Wholesale and retail trade, transportation, business services and to a lesser degree utilities, mining and agriculture are influenced by manufacturing activity and thus many jobs are generated by exports of manufactured goods.

A convenient way to look at the link of employment between industries is the number of non-manufacturing jobs supported by every 100 manufacturing jobs. In Vermont, 232 non-manufacturing jobs were generated by each 100 manufacturing jobs tied to exports in May.

Looking at export growth - a depiction of how fast state companies penetrate foreign markets - Vermont ranked twelfth among the fifty states in the first five months of 2005. In comparison to the first five months of 2004, foreign sales from Vermont's companies, seasonally adjusted, increased by an annual rate of 21.0 percent compared with a 10.6 percent average for the nation as a whole.

Will export orders from foreign merchants continue to grow in the rest of the year? It depends on the economic vitality in the rest of the world.

The recent survey of about 1,100 executives from 91 countries conducted by the German Ifo Research institute and the International Chamber of Commerce provides evidence that the global economy has entered a "cooling-down" phase. Derived from the opinions of the experts polled, the Institute's global economic climate indicator declined in the second quarter of this year but stayed above its longterm average level, signaling a slowdown in business activity.

Looking forward, business executives expect economic conditions to further deteriorate in the next six months resulting in a global "soft patch" and not a recession.