California’s Exports Fall 6.6% in 2nd Quarter

Providing further evidence that California is struggling to stay out of recession, new trade figures show that the state’s exports fell 6.6% from April through June.

The second-quarter trade report found that the drop was concentrated in computers and electronics, which make up the state’s biggest category of exports. The No. 2 category, industrial machinery, also posted a sizable decline, compared with the same period last year.

Exports of manufactured goods and other products made in California were down for all but two of the state’s top 10 foreign trading partners, China and Britain.

The news underscores the sharp downturn in Silicon Valley and other communities, particularly in the Bay Area, dependent on high-tech industries. Analysts say shipments of high-tech goods appear to remain weak in the current quarter. The report also follows other evidence of economic weakness in the state, including employment statistics showing that California lost 7,100 jobs in July.

“One of our major economic engines in 2000, international trade, is now sputtering,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. “Exports definitely are not looking good.”

Despite the weak second-quarter trade figures, Kyser hewed to his earlier prediction that California would avoid falling into recession this year. He noted that because of a strong first quarter, California’s exports for the first half of the year still are up 2.9% from 2000’s level, to $57.34 billion. Most analysts would consider the state in recession when it endures two or more consecutive quarters of shrinking economic output and declining employment.

This was the first quarterly decline in exports in two years, and the biggest fall California exports have taken since falling 6.8% in the fourth quarter of 1998. Last year, the state’s exports were up 20.7%.

The state export totals, calculated from Commerce Department statistics, were reported by the Massachusetts Institute for Social and Economic Research, a nonprofit organization in Amherst, Mass.

In the second quarter, exports by the computers and electronics sector were off 16%. That was more bad news for Silicon Valley, which also is suffering from a major domestic downturn in high-tech spending. Overall shipments of goods were off to each of California’s top three trade partners, Mexico, Japan and Canada.

South Korea, which last year was California’s fastest-growing foreign market, posted a 34.4% decline.

Brad Williams, senior economist for the California Legislative Analyst’s office, said the abrupt downturn in the second quarter stems from a worldwide economic slowdown.

“There are few countries in the world right now experiencing good growth,” Williams said. “There are few places to go to find expanding markets for U.S. goods.”

Among the few bright spots in the report was a 38.1% increase in exports to China, which was California’s 10th-largest trading partner during the quarter. Other bright spots in the report were 17% increases in the agricultural and food products category and in chemicals.

California’s exports totaled $27.06 billion in the second quarter, versus $28.97 billion in the same quarter last year. This year’s second-quarter total was down 10.6% from $30.28 billion in the first quarter.