March 2008

Real Texas exports lost their positive momentum in the final quarter of 2007, edging down 0.4 percent, following two successive quarters of solid expansion. [1] Despite the modest contraction, Texas exports are up 4 percent from year-ago levels.

The fourth-quarter decline in export growth was spurred by softening in the economies of Texas’ major trading partners, Mexico and Canada, which together account for just over 40 percent of the state’s exports (Chart 1). Exports to Mexico and Canada slipped, 3.9 percent and 0.3 percent, respectively.[2] Exports to Asia (excluding China), dipped 0.8 percent, while exports to the European Union, Latin America (excluding Mexico) and China rose, 1.3 percent, 4.6 percent and 2.6 percent, respectively.

Chart 1

Export growth was sluggish across the state’s top four export industries. Only chemical exports witnessed an increase during the quarter, rising 4.6 percent (Chart 2). The increase was spurred by the soft price of natural gas compared with oil, which gives U.S. chemical manufacturers a cost advantage over their European counterparts. [3] Computer and electronics exports dropped 2.6 percent, while exports of transportation equipment and industrial machinery fell 6.5 percent and 11.3 percent, respectively. In 2007, the top ten Texas commodities exported (in terms of dollar value) were chemicals, computer and electronic products, nonelectrical machinery, transportation equipment, petroleum and coal products, electrical equipment, primary metals, fabricated metals, agricultural products and food and kindred products.[4]

Chart 2

Notes All data used in this analysis have been seasonally adjusted. Growth rates are not annualized unless otherwise noted. Chemical manufacturers in the U.S. use natural gas in the production process, while their counterparts in Europe use oil. Hence, lower natural gas prices relative to oil prices have given U.S. chemical manufacturers a cost advantage over their European counterparts. The source of quarterly export data is the World Institute for Strategic Economic Research (WISER Trade). For additional information or questions, please contact Laila Assanie at 214-922-5191.