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Last modified: Thursday, September 15, 2011

IU Kelley School study: Indiana exports set new record in 2010

FOR IMMEDIATE RELEASE
Sept. 15, 2011

BLOOMINGTON, Ind. -- Indiana firms exported $28.7 billion in goods in 2010, which was a new record, according to a new study released by the Indiana Business Research Center at Indiana University's Kelley School of Business.

Overall, the United States exported nearly $1.3 trillion in goods last year.

"While it may seem that Indiana's share of all exports is relatively small, over the past decade, Indiana has outperformed the nation in its average annual growth rate of exports, 9 percent versus 6 percent, respectively," noted Tanya Hall, an economic research analyst at the IBRC.

The report, "Global Positioning: Indiana's Exports and Foreign Direct Investment," presents data and trends for Indiana exports and foreign direct investment (FDI) activity in the state. It also includes a focus on trade and investment linkages between the European Union and Indiana. The full report is available online at http://www.ibrc.indiana.edu/international/pdf/globalpositioning2011.pdf.

The global slowdown in 2008 and 2009 affected U.S. and Indiana exports, particularly in 2009. While the U.S. continued to post respectable export growth in 2008 -- increasing 12.1 percent -- in 2009 export activity contracted 18 percent. Exports rebounded in 2010.

Indiana, on the other hand, felt the initial effects of the recession in 2008, but had a less severe contraction in 2009. In 2010, the Indiana rebound was stronger than the nation and the Midwest.

"Last year, Indiana marked the strongest year-over-year growth in a single year since 2000," Hall said. "By way of comparison, Indiana's rank among all states in terms of export sales fell to 15th with its anemic 2008 growth, but rose to 14th in 2010.

"Much of this change in exporting activity in the past three years can be attributed to the export of industrial machinery and vehicles and parts -- manufacturing staples in the Midwest," she added.

Though Canada, Mexico and Germany generate a majority of the demand for Indiana's exports, growth of late has derived from Spain and the emerging economies of Brazil and China.

Germany, Indiana's top foreign purchaser of pharmaceutical products as well as optical and medical instruments, has seen its share of Indiana's exports increase and now accounts for 6.4 percent of Indiana's foreign sales. In 2010, Germany became the third-largest purchaser of Indiana exports.

Canada, still Indiana's top export destination, increased its purchases of Indiana products in 2010 by 26.3 percent, a welcome jump from its 20.2 percent decline in 2009. As other countries have increased their purchases of Indiana goods, Canada's percentage share of Indiana exports has fallen. In 1999, Canada accounted for more than half of Indiana's export sales, but now accounts for 37.2 percent.

The European Union (EU) and its euro zone countries are important trading partners to Indiana. The EU imported more than a quarter of Indiana's exports (27 percent) in 2010. Of the $7.7 billion the EU imported in 2010 from Indiana, $5.9 billion (77 percent) was destined for euro zone countries.

Vehicles and parts has remained Indiana's top exporting industry and experienced tremendous growth in the past year (56.5 percent), after dropping 25.5 percent in 2009.

Pharmaceutical products became the second-largest exporting industry, which was inevitable with its 95.2 percent average annual growth rate since 2001.

In third place is industrial machinery, which is still an exporting powerhouse at $4.3 billion in 2010. The optical and medical instruments industry ranked fourth highest, having grown an average of 18.1 percent annually over the past nine years.

Rounding out the top five export industries is electrical machinery, which will soon face stiff competition from organic chemicals for fifth place.

Foreign Direct Investment (FDI)

As with exports, foreign direct investment in the U.S. and Indiana has been volatile in recent years. In 2008, the United States had nearly 5.6 million workers employed at majority-owned U.S. affiliates (MOUSA) -- a company in which a foreign investor or company had at least a 50 percent stake. Slightly more than one in five MOUSA workers was employed in the Midwest.

Historically, manufacturing has been the dominant business activity drawing foreign direct investment to Indiana. In 2008, the latest year for which official data are available, 61.6 percent of Indiana's total MOUSA employment was in the manufacturing sector. Indiana MOUSA employment ranked 14th among states, with 141,600 workers, and accounted for 5.6 percent of all Indiana employment.

In order to present more current, "real-time" trends and expectations for the future, the IBRC used FDI announcements for greenfield and expansion investments from 2008 to 2010 in the report, using fDi Markets™ data.

Nationally, in 2008 to 2010, 953 FDI announcements were made for an estimated total investment of $183.7 billion and an expected 263,800 jobs. The Midwest captured 16.5 percent of the FDI announcements. Indiana registered 88 FDI announcements with plans to invest roughly $4.7 billion in the state and create approximately 6,900 jobs.

"This places Indiana third among Midwestern states in the number of investment announcements," Hall said. "Compared nationally, Indiana's total estimated value of investments ranked eighth and the number of expended jobs associated with those investment announcements ranked 15th.

Of the expected 6,900 Hoosier jobs that were announced over the three-year period, nearly 70 percent will be engaged in manufacturing as the primary business activity. On an industry basis, 28.4 percent of Indiana's expected employment from FDI announcements over this period will be in the automobile sector.

Hall cautioned that while fDi Markets presents the best data available for real-time FDI activity, it is based on publicized intentions for the investments being planned by foreign firms that may not materialize.

"The global recession adversely affected export and FDI activity for the U.S. and Indiana. Indiana has rebounded nicely, however, with strong export numbers and FDI announcements in 2010," she said. "Several export industries have had strong average annual growth rates over the past nine years including aircraft, spacecraft and related parts, pharmaceutical products, iron and steel and optical and medical instruments.

"These strong growth patterns have been led by purchases in emerging countries, such as Brazil and China, and will likely continue changing the composition of Indiana's top exporting industries and export destinations in the years to come," she said. "MOUSA activity in the United States and Indiana appears to follow previous trends, with Indiana remaining attractive to investors in manufacturing. European countries and Japan are large investors, generating many jobs, a trend that is also likely to continue as Indiana continues to court Asian and European investors."

Production of the report was partially supported by the European Union Center, through a grant from the European Union and by the IU Center for International Business Education and Research.