Business Monday

Connecting Fed policy and South Florida exports

Ken Roberts
Ken Roberts

When the final tally on 2015 is calculated, U.S. trade will have fallen for the first time in at least two decades without a significant shock to the U.S. and global economy.

This column is about why that is important in South Florida, traditionally a strong exporting Customs district.

The only other two years that the nation’s trade has fallen over the last 20 years was in 2001, the year of the terrorist strikes on New York and Washington, and 2009, the year of the global recession kick-started by the condo meltdown in Miami, Las Vegas and elsewhere in the United States.

This year, then, is at the very least an outlier and, from the point of view of the Federal Reserve, which makes decisions that generally have an impact on all sorts of interest rates, somewhat arresting if not confounding.

I am thinking about this because I sit on the Federal Reserve Atlanta branch’s Trade and Transportation Advisory Council, and have just returned from a meeting last week.

The Federal Reserve, which is generally focused on keeping inflation low and employment high, has kept the price of money at close to zero for nine years to “right” the U.S. economy. Today, it is paying great attention to the impact the strong dollar is having on U.S. exporters and trying to determine whether raising interest rates for the first time since 2008 would exacerbate any negative impact.

That matters not only across the country but also here in South Florida. South Florida ranks as the nation’s 12th most important Customs district but is eighth most important for exports. Over the last two decades, because of that export strength, South Florida has more often than not led the nation with the largest trade surplus — the value of exports over imports.

But with one-year swings of something like 50 percent in both the Brazilian real and the Colombia peso — the currencies of South Florida’s top two trade partners — South Florida’s exports are getting whacked and the air being let out of its deficit. This year, those two countries alone are accounting for more than 25 percent of all South Florida exports, according to the latest U.S. Census Bureau data — and that’s down from more than 28 percent the last two years.

And here’s what’s happening, thanks to that strong dollar and situations particular to Brazil and Colombia: that iPhone, those Nike shoes, that Caterpillar front-end loader, that General Electric turbine — anything traded using the dollar as a currency — is that much more expensive than a year ago.

That, then, is the Fed’s quandary: Even though inflation has remained in check and unemployment remains relatively strong — even though it appears the time might be ripe to increase interest rates from the floor — exports are not strong. Let’s look at the numbers.

On a national level, imports are down slightly through the first seven months of this year, 3.52 percent — and that can be attributed to a stunning 48 percent decline in oil, which has slipped behind motor vehicles to rank as the second most important import. Oil imports are down almost $72 billion this year while overall imports have fallen slightly more than $50 billion.

But buried within that decrease is good news: The United States is becoming more energy self-sufficient thanks to domestic oil and natural gas mining success and gasoline prices are, relatively speaking, low.

What is more troubling to both the Federal Reserve as well as exporters and their service providers across the nation and in South Florida is the larger 5.59 percent drop in exports. South Florida’s exports are down a similar percentage, at 5.74 percent. South Florida’s exports have fallen 15.92 percent since this time in 2012, a year of a record pace. That’s a greater percentage decline than any other Customs district among the nation’s top 20.

This year alone, exports to Brazil have fallen $1.47 billion and Colombia’s $338.61 million. That amounts to almost 85 percent of the total decline for all South Florida exports.

A quick look at South Florida’s top three exports this year tells the story:

The leading export, civilian aircraft and parts, has declined 12.41 percent to $3.02 billion. The leading market is Brazil, which is home to Embraer, the world’s third-largest jet manufacturer behind Boeing and Airbus.

The second-ranked South Florida export, cellphones and related parts and equipment, is off 9.84 percent to $2.7 billion. South Florida leads the nation in these exports and, once again, Brazil is the leading market. Colombia is the second-leading market.

The third-leading export is computers. Computer exports are down 14.11 percent this year, falling to $1.86 billion. South Florida also leads the nation in computer exports, with Brazil and Colombia ranking first and second in market share.

The fourth most important export from South Florida tells a different story. That export is gold, and the value of shipments has fallen 46.74 percent this year, when compared to the same seven-month period of last year.

Gold has been used as a hedge against insecurity about the global economy since 2008, largely imported into Miami International Airport from Mexico, Colombia and other Latin American nations and then exported to Switzerland, Hong Kong — explaining the large decrease in the chart — and a few other nations.

The only top five export showing an increase in value this year is No. 5-ranked medical devices, which despite the significant price increases for buyers in Latin America, has gained 3.29 percent in value this year.

I will take a closer look at South Florida’s top 10 exports in a series of columns beginning next week, following on my previous series on the top 10 imports and the top 10 trade partners.

Hopefully, this column provides some context to what the Federal Reserve is contemplating and by how much it should raise interest rates for the first time in years.

Reach Ken Roberts, president of World City, at kroberts@worldcityweb.com. Twitter: @tradenumbers.

Miami trade by country

Change in rank

July 2015 YTD

Total South Florida Export Markets

July 2015 YTD

1-year change

1-year change

10-year change

10-year change

World total exports

$ 34,997,866,904

-$2,130,963,461.00

-5.74%

$15,837,151,399.00

82.65%

0

1

Brazil

$ 5,940,270,305

-$1,471,659,995.00

-19.86%

$2,922,522,094.00

96.84%

0

2

Colombia

$ 2,884,787,337

-$338,611,833.00

-10.50%

$1,631,164,227.00

130.12%

0

3

Chile

$ 2,088,489,309

$264,401,974.00

14.50%

$1,326,776,311.00

174.18%

0

4

Dominican Republic

$ 1,673,096,129

$13,402,476.00

0.81%

$401,878,480.00

31.61%

-2

7

Venezuela

$ 1,494,886,721

-$88,338,806.00

-5.58%

-$217,704,639.00

-12.71%

1

5

Peru

$ 1,654,155,194

$169,533,780.00

11.42%

$1,170,133,434.00

241.75%

1

6

Argentina

$ 1,634,794,466

$206,316,613.00

14.44%

$932,636,555.00

132.82%

-27

35

Hong Kong

$ 146,974,972

-$1,229,220,183.00

-89.32%

$71,548,344.00

94.86%

1

8

Costa Rica

$ 1,208,723,606

$16,896,909.00

1.42%

$39,330,153.00

3.36%

0

10

Panama

$ 1,098,985,868

-$21,869,987.00

-1.95%

$679,164,410.00

161.77%

2

9

Honduras

$ 1,181,959,474

$63,492,353.00

5.68%

$265,013,928.00

28.90%

0

12

Ecuador

$ 905,027,591

-$137,659,029.00

-13.20%

$406,409,668.00

81.51%

-2

15

Paraguay

$ 759,879,833

-$194,402,941.00

-20.37%

$283,254,708.00

59.43%

Source: WorldCity analysis of U.S. Census Bureau data

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