Exports from the Fourth District States
In the Fourth District states of Kentucky, Ohio, Pennsylvania, and West Virginia, exports make a significant contribution to the economy. The total value of goods exported by these states is approximately $122 billion per year, which equals just under ten percent of their combined Gross State Products. In the recent recession, their exports took a hit but have since rebounded. Despite a moderate slowdown in the third quarter of 2012, long-term trends in the Fourth District's exports look promising. Foreign sales of chemicals are increasing, and markets in China and Mexico are growing.
During the recession, total exports from the Fourth District declined by over 18 percent. Since then, exports from Kentucky, Ohio, and Pennsylvania have slowly returned to pre-recession peaks. Meanwhile, West Virginia's exports have soared, as markets abroad have demanded the state's mineral products.
Among the Fourth District states, West Virginia's total exports have shown the most impressive trend. Before the recession, the value of West Virginia's exports was approximately $1 billion per quarter. Since the recession, that value has climbed above $2.5 billion, driven by mining products including coal. (These figures are adjusted for inflation to represent 2012 dollars.) Kentucky's total exports have slowly returned to their pre-recession peak near $5.8 billion per quarter. Ohio and Pennsylvania have also recovered from precipitous drops in exports during the recession. For Ohio, exports averaged a near-peak $12.2 billion per quarter in the first three quarters of 2012. Pennsylvania's exports grew to a new high of $10.9 billion in the second quarter of 2010 before sliding back to $9.1 billion in the third quarter of last year.
Slowdowns in exports to China and the euro zone received much attention last year, but the greatest concern for Fourth District exporters is still North America. Canada is by far the largest purchaser of Fourth District exports, followed by Mexico. Despite a relatively mild recession in Canada, exports heading there dropped from a peak of $10.4 billion per quarter in 2008 to $7.8 billion per quarter in 2009. Fourth District exports to Mexico have grown 22 percent above their pre-recession peak.
As of third quarter 2012, exports to Canada and Germany were down 6 to 7 percent from the previous quarter. While sales to China fell from $2.2 billion to $1.7 billion, total exports in those quarters and the two before were nearly double the total value of exports in 2007.
The Fourth District states are major exporters of durable and intermediate manufactured goods. These sectors are highly cyclical, and this can be seen when we look at exports in transportation equipment, machinery, and metals over time. While each of these categories has recovered since 2009, transportation equipment and primary metals are still below their peak values after adjusting for inflation. Chemicals has been a growth category for the district, and the district may benefit from the expansion of natural gas production because natural gas is a key input for the manufacturing of chemicals. The third quarter of 2012 saw declining values for six of the district's most important export categories: transportation equipment, chemicals, machinery, electronics, metals, and minerals.
The underlying driver of several of these trends in Fourth District exports is the integration of the North American auto industries. The volume of U.S. auto parts exported to Canada closely follows Canadian auto production volumes. Auto parts are the highest-value component of Ohio's largest exporting sector, transportation equipment. Canadian auto production dropped 46 percent in the recession, bringing down auto parts exports, the transportation equipment category, and Ohio's total exports. Coming out of the recession, Mexico's auto production grew to exceed Canada's. This is reflected in more Fourth District exports heading to Mexico. A large fraction of the exported auto parts are eventually consumed in the U.S. because many of the vehicles assembled in Canada and Mexico are sold in the U.S.
While the Fourth District exports have rebounded during the economic recovery, so has export production around the country. Indeed, over the last decade, the total value of the Fourth District states' exports as a percentage of all U.S. exports has fallen slightly, from 8.05 percent to 7.77 percent. Pennsylvania and West Virginia have increased their share of total U.S. exports. Although Ohio and Kentucky's exports have returned to peak levels, they have not kept up with the growth of all U.S. product exports, and as such, their share of U.S. exports has declined.
Source: Bureau of Labor Statistics, Current Employment Statistics.