North Carolina Exports by Quarter (in constant 2Q 2013 dollars)

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1 P. 1/6 in Billions in Billions 1 North Carolina Trade Report 1, First Half of 2013 Exports from North Carolina play an increasingly important role in the state s economic recovery and job growth. That has been especially true in the first half of 2013 as North Carolina s merchandise exports totaled $14.8 billion, an increase of 5.5% (or $774.9 million) from the same period in. The increase has helped the state achieve its highest export-value in a 6-month period. $8 North Carolina Exports by Quarter (in constant 2Q 2013 dollars) $7 $6 $5 $4 NC TOTAL NC Manufacturing Export Sector Manufactured Goods Represented 92.8% of North Carolina s Merchandise Exports Manufacturing dominates North Carolina s merchandise exports. During the first half of 2013, manufacturers saw a 6.0% increase in exports over the same period last year ($13.8 vs. $12.9 billion). The growth was primarily driven by a $296.8 million increase in chemical exports (up 11.5%), $252.1 million increase in transportation equipment (up 17.1%), and $137.4 million increase in electrical equipment (up 22.2%). Machinery (excluding electrical) 2 exports were down $142.5 million compared to the first half of. Agricultural products continue to be the state s largest non-manufactured export. $2.6 $2.3 $2.0 $1.7 $1.4 $1.1 $0.8 $0.5 North Carolina Top 5 Exports by Quarter (in constant 2Q 2013 dollars) Textiles And Fabrics $ The trade report highlights the state s merchandise exports only as service exports are measured at the national level. Also state imports are not covered in this report because import statistics from US Census Bureau are available only on an annual basis. 2 Exports of Machinery (NAICS 333) do not include electrical equipment which is categorized under Electrical Equipment, Appliance and Components (NAICS 335).

2 P. 2/6 Export Markets Steady growth to China, Mexico, and Japan; big jump to France and India Exports to Canada experienced a slight decline of 2.8% but the country continues as North Carolina s largest export destination receiving 23% of the state s total merchandise exports in the first half of this year. Canada was followed by China (9.8% share of NC exports), Mexico (8.4%), Japan (5.9%), which all reported growth in exports compared to. Exports to France increased by 66.7% over the same period last year, and replaced Germany as the state s fifth largest export partner. Out of the top five markets, exports to Saudi Arabia and India jumped 44.3% and 85.9%, respectively. Total All Countries $1,726,116,617 Total All Countries $1,371,074,716 Total All Countries $947,170,811 #1 Canada Despite slight decline, Canada remains the leading market for North Carolina exports Summary: North Carolina s exports to Canada totaled $3.5 billion, a decrease of 2.8% from the same period in. Exports of machinery, chemicals, and transportation equipment each account for about 18% of exports to Canada, and together represented over half of North Carolina s exports to the north. Key Export Sectors: Within the top three export categories, chemical products were a top performer, rising 23.6% compared to the same period in. Largest Trading Partners for North Carolina's Top 5 Exports, First Half of 2013 All Merchandise Exports Machinery Equipment Canada $3,455,363,652 Canada $617,513,632 Canada $637,962,574 China $1,452,115,062 Mexico $250,499,622 Mexico $184,769,085 Mexico $1,245,692,952 Japan $233,404,587 China $122,339,804 Japan $869,224,498 Germany $188,955,902 Saudi Arabia $115,692,281 France $589,617,512 China $167,995,012 Japan $111,415,933 Total All Countries $14,847,927,744 Total All Countries $2,875,391,033 Total All Countries $1,989,838,392 Computers & Electronics Textiles & Fabrics Canada $610,054,783 Canada $265,098,513 Honduras $304,692,310 France $424,890,277 Hong Kong $215,171,282 Mexico $139,731,729 Mexico $183,239,284 China $214,703,163 China $101,604,351 United Kingdom $84,378,906 Mexico $63,156,212 Canada $97,130,208 Brazil $56,908,891 South Korea $55,195,802 Dominican Rep. $78,646,147 However, that rise was tempered by a 22.6% fall in machinery exports. Exports of transportation equipment rose a steady 3.6%. Canada remains the state s leading market for all three export sectors. Other Sectors: Other key exports from North Carolina to Canada include computer equipment & electronic products and electrical equipment & appliances, although each fell 5.6% and 4.9% respectively in the first half of The state s top five exports to Canada accounted for over twothirds (68.1%) of its overall exports to the country. NC s Ranking: Through the first half of 2013, North Carolina ranked 15 th in the nation in the value of its NC Top 5 Exports to Canada Electrical Equipment, Appliances, And Component

3 P. 3/6 exports to Canada and 3 rd among the 12 states in the Southeast region, 3 the same spots it held in. Nationwide, exports to Canada rose 1.5% in the first half of 2013, but only 1.0% in the Southeast. Macro Notes: Canada recently named a new central-bank governor, Stephen Poloz, who formerly headed Export Development Canada, the country s export-finance agency. Poloz has several major policy issues to tackle. The Canadian dollar remains strong, hovering near par with the US dollar, hurting exporters and helping importers (and NC s exports). Unemployment remains just north of 7%, and economic growth is only expected to increase 1.5% this year. Despite these challenges, there are few signals that the new central banking head will make drastic monetary policy changes. #2 China Exports Jump 12%, led by growth from computers, chemicals, agriculture, and food Summary: China remains North Carolina s second largest export destination. The state s merchandise exports to China were approximately $1.5 billion, a 12.0% rise compared to the first half of. Of the seven industries with exports greater than $100 million, six posted double-digit percentage growth in the first six months of Key Export Sectors: Computer and electronic products, the state s largest export category to NC Top 5 Exports to China China, posted a $34.2 million gain over the previous year, an increase of 18.9%. Chemical exports also jumped $35.6 million, up 26.9%. The only major export category to see a decline was Agricultural Products machinery, down $19.9 million, or 14.0%. Other Sectors: Agricultural and food products also showed significant increases rising 42.5% and 58.3% respectively. While not a major export Food And Kindred Products category previously, textiles and fabrics posted a very large 208.2% gain compared to, boosting the sector from the state s 14 th to 7 th largest export to China. The growth was driven by a substantial increase in exports of fibers, yarns, and threads, which rose from just under $3 million in the first half of, to over $72 million in NC s Ranking: Through the first six months of, North Carolina ranked 13 th in the nation in exports to China, falling a spot from, and 4 th in the Southeast Region, gaining a spot from. Nationwide, exports to China rose 4.2% in the first half of, but fell 1.9% in the Southeast. Macro Notes: China s unprecedented growth is expected to slow to an estimated % annual pace in The total debt ratio in the country has risen to over 200% (and forecasted to approach nearly 250% by 2015), and some analysts expect that increased debt service could further dampen growth. However, industrial production increased significantly in the first half of 2013, rising 9.7% over the previous year, which may have played a role in the state s rising exports to the country. #3 Mexico North Carolina s chemical exports to Mexico reach record high Summary: Mexico is North Carolina s third largest trade partner and the largest among Latin American countries. During the first half of 2013, North Carolina s exports to Mexico rose 8.7% over the same period last year. The growth was driven by increased shipments of machinery and transportation equipment. 3 Regional divisions are developed by the Bureau of Economic Analysis. Southeast region includes the 12 following states: VA, WV, NC, SC, GA, FL, AL, MS, LA, AR, TN, and KY.

4 P. 4/6 Key Export Sectors: Chemical products continue to be North Carolina s largest export to Mexico, representing 20.1% of the state s merchandise exports to the country during the first six months of this year. However, chemical exports fell $55 million in the first half of 2013, or 17.9%. Other Sectors: Despite the fall in chemical exports, three other export categories posted significant gains. Machinery increased $32.3 million (21.2%) to $184.8 million. Transportation showed a significant $79.4 million (76.5%) increase. Textiles and fabrics exports also grew $24.7 million (21.5%). These three, in NC Top 5 Exports to Mexico Textiles And Fabrics addition to chemical products, account for over 60% of North Carolina s exports to Mexico. NC s Ranking: Through the first six months of 2013, North Carolina ranked 14 th in the nation in the value of its exports to Mexico and 3 rd among the 12 states in the Southeast Region, - the same rankings as. Nationwide, exports to Mexico rose 4.4% in the first half of 2013, and rose 6.6% in the Southeast. Macro Notes: According to the U.S. Department of State, the High Level Economic Dialogue was established to further elevate and strengthen the U.S.-Mexico bilateral commercial and economic relationship this past May. Mexico is making progress in its intellectual property rights enforcement efforts, although piracy and counterfeiting rates remain high. Additionally, Mexico joined the Australia Group, an informal forum of countries which, through the harmonization of export controls, seeks to ensure that exports do not contribute to the development of chemical or biological weapons. #4 Japan Steady growth in agriculture and food exports; big jump in machinery Summary: North Carolina s merchandise exports to Japan totaled $869.2 million, up 6.5% from the same period last year. Steady growth from chemicals, food, beverage & tobacco, and a large increase in machinery led the way. Key Export Sectors: Chemical products were the state s top export to Japan, totaling $233.3 million - NC Top 5 Exports to Japan an increase of 2.4% compared to the same period in. Machinery exports more than doubled in the first half of 2013, increasing from $54.1 to $111.4 Food And Kindred Products million. Computer and electrical products also posted a 38.6% gain ($14.6 million). Beverages And Tobacco Products Other Sectors: Food products continue to be the state s second largest export to Japan, growing 3.6% ($5.4 million) over the same period a year before. Beverages and tobacco products also rose 4.7% ($6.4 million). Food and agricultural exports account for over one-third of the state s total exports to Japan. The largest components of these two categories are meat (about 17% of NC total exports to Japan) and tobacco (16%); both of which grew about 3% and 4% respectively in the first half of NC s Ranking: Through the first six months of 2013, North Carolina ranked 10 th in the nation in the value of its exports to Japan and 3 rd among the 12 states in the Southeast Region both the same rankings from. Nationwide, exports to Japan fell 7.0% in the first half of 2013, and fell 7.7% in the Southeast. Macro Notes: Japanese Prime Minister Shinzo Abe s Liberal Democratic Party made significant gains in July s parliamentary elections, paving the way for more Abenomics, the prime minister s economic recovery plan. The plans include an easing of monetary policy, an additional $100 billion in fiscal stimulus,

5 P. 5/6 and supply-side reforms and deregulation. The reforms may also include deregulation in the agricultural sector to make the sector more competitive. Japan reported a 14.7% year-on-year increase on exports in August, closing the country s trade gap to $9.8 billion. #5 France Transportation exports help France break into NC s top 5 export markets Summary: France became North Carolina s 5 th largest export market in the first half of 2013 on the back of a huge increase in transportation equipment exports. France jumped all the way from #10 in the first half of to knock Germany out of the state s top 5 markets this year. Exports to France overall increased 66.7%, or nearly $236 million. Key Export Sectors: One industry led the charge: transportation equipment. Exports in this NC Top 5 Exports to France category rose from $151.0 million in the first half of to $424.9 million in the same period of Transportation equipment accounted for 72.1% of North Carolina s exports to France. Within transportation, aerospace products and Primary Metal Manufacturing parts are by far the largest sub-category, Miscellaneous Manufactured accounting for 92.1% of transportation exports to Commodities France, and 66.4% of overall exports. Aerospace exports grew almost 200% in the first half of 2013 to $391.3 million. Motor vehicle parts, the other main component of the transportation sector, also grew 117.1% to $33.6 million. Other Sectors: On the whole, most of the other significant exports to France were flat or fell in the first half of 2013., the second largest export, rose a slight 0.6%. Primary metal manufacturing saw its exports drop 32.6%, while other manufactured commodities fell 20.7%. NC s Ranking: In the first half of 2013, North Carolina ranked 9 th in the nation in the value of its exports to France, up from 12 th in, and 2 nd in the Southeast Region, its same ranking from. Nationwide, exports to France fell 2.9% in the first half of 2013, but rose 20.4% in the Southeast with North Carolina accounting for 40% of the region s growth. Macro Notes: The French economy posted its best quarter since President François Hollande took office in. GDP grew 0.5% in the second quarter, beating economist estimates of 0.2%. Industrial production was also up 1.4%. However, unemployment persists at a 14-year high (10.8%), and the French budget deficit continues to expand. Emerging Market Focus India Summary: North Carolina exports to India grew a staggering 85.9%, or $108.7 million in the first half of Through early, exports to the subcontinent were generally flat, but since then exports have more than doubled (see chart). Similar to the case of France, where exports increased on the back of one specific industry, exports to India were also driven by one key industry: chemicals. Key Export Sectors: Chemical exports to India increased nearly 350% compared to the first half of, an $85.5 million gain. account for over 46% of the state s exports to India. Specifically, fertilizer and other agricultural chemicals saw an enormous increase in the first six months of 2013, increasing from almost zero in to $87.6 million. To put it in context, from 1997 to, North Carolina averaged about $0.9 million in fertilizer exports to India per quarter. In the most recent four quarters, however, that number skyrocketed to $31.5 million. Other Sectors: While chemicals led the way, two other industries have seen substantial growth. Computer and electronic product exports increased 114.9% ($35.9 million). Non-metallic minerals also

6 P. 6/ Millions grew significantly at 343.3% ($27.0 million), with glass exports increasing by almost 600% ($21.2 million). Combined with chemicals, these three sectors make up almost three-quarters of the state s total exports to India. $160 $140 $120 $100 $80 $60 $40 $20 North Carolina Exports to India (-2013) (in constant 2Q 2013 dollars) Nonmetallic Mineral Products All other categories $0 NC s Ranking: In the first half of 2013, North Carolina ranked 13 th in the nation in the value of its exports to India, up from 22 nd in, and 4 th in the Southeast Region from 8 th in. Nationwide, exports to India rose 12.2% in the first half of 2013, but fell 8.2% in the Southeast. Macro Notes: While the jump in Indian exports is certainly good news for North Carolina exporters, there has been some challenging economic news from the subcontinent recently. Like China, economic growth in India has slowed to 4-5% annually, compared to 8-9% during the boom. Inflation has risen significantly, standing now around 10%. The rupee has lost 13% of its value relative to the dollar over the past three months and 27% in the past three years, putting pressure on US exports to the county. While several emerging markets are experiencing these problems right now due in part to potential tightening of US monetary policy causing an investor retreat from emerging markets, India-specific challenges related to rising budget deficits, infrastructure development, and labor market flexibility remain.