Strong euro gives a boost to N.H. exporters

This year dawned with signs of a slowdown in foreign sales from New Hampshire’s companies. Although exports of locally made goods edged down in January by 3.2 percent from December, they held up well and stayed at high levels.

In the latest snapshot of the state’s global business, sales abroad of goods made in the Granite State recorded $194.6 million in January, adjusted for seasonal variation – a statistical process that equalizes monthly performance for factors such as the number of days in a month and holidays.

How did New Hampshire exporters fare in selling their products abroad this January in comparison to a year ago? The changing conditions of the global economy over the last 12 months had favorable effects on the demand for made-in-New Hampshire goods. In January of 2005, state companies shipped abroad $16.9 million, or 9.5 percent, more goods than in January 2004.

January’s exports were largely driven by manufactured goods, which accounted for 80 percent of all state exports. Foreign shipments from manufacturing companies fell in January by 3.8 percent from the previous month to $155.2 million, adjusted for seasonal variation.

On an annual basis, however, January 2005 sales abroad from state factories were $5.3 million, or 9.5 percent, higher than in January of last year.

Exports of non-manufactured goods went down 1.2 percent in January, to $39.4 million, adjusted for seasonal variation. This group of shipments abroad consists of agricultural goods, mining products and re-exports, which are foreign goods that entered the state as imports and are exported in substantially the same condition as when imported.

For the country as a whole, U.S. exports of goods, seasonally adjusted, edged up slightly by 0.2 percent in January to a record level of $71.2 billion, following a 4.4 percent jump in December.

The slowdown in the growth of exports combined with a surge in imports generated the second-largest-ever trade deficit in January.

Will slowdown persist?

The New York-based Economic Research Department of the Bank of Tokyo-Mitsubishi conducts a monthly foreign trade survey to evaluate freight levels of current and future shipments from trade centers, such as ports, around the country. In the most recent survey, 24 percent of the respondents expect exports to be higher over the next three months. No change is expected by 52 percent, while the remaining 24 percent anticipate a decline.

“Export activity is expected to wane over the next three months,” said Ellen Beeson, director of the department.

One of the major global developments in the last three years is the so-called realignment of currencies, which relates to an enduring change in a key currency against the dollar. Of main interest for international trade is the strengthening of the euro.

Since February 2002, the euro has increased in value by 50 percent against the dollar, implying that businesses and consumers from the euro area could now pay 50 percent less than in 2002 to buy American goods if their prices have stayed the same.

The 12 members of the euro bloc have opted to use the euro as their currency, and their integration has created the world’s second market after the United States. Consequently, the 12 nations make up the largest potential single market for New Hampshire’s exporters.

Have New Hampshire companies reaped the benefits of a gradually rising euro that works its way in increasing state exports? A strong euro makes New Hampshire’s goods cheaper in the euro area’s single market and gives state exporters an extra advantage.

In January, $40.1 million in goods made in New Hampshire were sold to euro nations. In comparison to last year, shipments to euro nations last January were 4.3 percent lower than in January 2004.

National exports to euro area accounted for 16 percent of all U.S. exports in January; after Canada, it is the second-largest destination of American-made goods.

At the state level, foreign shipments of goods from New Hampshire to the nations that use the euro accounted for 22 percent of all state exports in January.

In other words, one-fifth of all state exports – and consequently the thousands of jobs tied to these exports – depend on the economic conditions of the euro area and the value of the euro. In January, New Hampshire ranked 11th in terms of dependence on the economic health of the euro.

Will the recent surge in the euro boost state exports? It doesn’t happen right away.

“It may not be until mid to second half of 2005,” argued Beeson at the Bank of Tokyo-Mitsubishi.

Evangelos Simos, chief economist of the consulting and research firm Infometrica Inc., is editor of international affairs for the Journal of Business Forecasting and professor and department chair at the University of New Hampshire. He may be reached at eosimos@infometrica.com. Distributed by Infometrica Inc.