Look for Orange County exports to post a fourth consecutive year of growth in 2006.
Exports are expected to rise 14.8% to about $13 billion next year, according to a report by Vincent Dropsy, a research associate at California State University, Fullerton’s Institute for Economic and Environmental Studies.
Exports are set to grow 9.4% in 2005.
OC’s biggest gain in recent years was in 2004 when exports shot up 17%, a delayed reaction to the dollar falling to historic lows. A weak dollar makes U.S. goods cheaper around the world.
“There’s no question 2006 will be better than 2005,” said Anil Puri, dean of the College of Business at Cal State Fullerton.
Technology gear again will account for the biggest slice of exports. In 2004, more than half of all OC exports were computer and electronics equipment. Other key sectors include food and transportation equipment.
Exports have risen despite a strengthening dollar, which makes U.S. products more expensive abroad. In the past year the dollar has risen 9% against the world’s major currencies.
Last week the dollar tumbled on news of a record trade deficit and a policy shift at the Federal Reserve that soon could put an end to rising interest rates.
Still, the dollar has fallen about 20% since early 2002.
“Overall, I think Southern California exports are still (reasonably) priced,” said Scott Anderson, an economist with San Francisco-based Wells Fargo & Co. “That will continue to be a support for exports in the coming year.”
Consumers in Asia and Europe are spending again,boosting demand for OC products.
“Their domestic economies are picking up some momentum,” Anderson said.
One of the fastest-growing countries continues to be China. Its eye-popping growth rates of some 9% are creating a wealthier class that’s driving imports there, Anderson said.
China was the eighth biggest buyer of OC goods last year. Combine China and Hong Kong and they make up the fourth-largest buyer of OC goods.
Other hot areas in Asia include Japan, the No. 2 buyer of OC goods, and South Korea, also in the top 10.
Meanwhile, the European Union’s economy is set to grow 1.5% in 2005 and 2.1% next year. That could bode well for Anaheim’s Lunada Bay Corp., which makes high-end swimsuits.
Lunada Bay started selling in its first foreign market, Australia, this past year, and plans to jump into Europe in 2006. About 80% of its production is done in OC and Los Angeles.
“We feel that there is worldwide interest in California swimwear,” said Susan Crank, the company’s chief executive.
Exporters won’t be able to count on much more in the way of free trade agreements.
During this past summer, Congress narrowly OK’d the Central American Free Trade Agreement, which cuts barriers between the U.S. and the Central American countries of Costa Rica, Honduras, Nicaragua, Guatemala and El Salvador, along with the Dominican Republic.
These countries don’t have a big impact for OC exporters. But the deal gave some hope for a wider free-trade zone with much of Latin America.
But hopes for a Free Trade Area of the Americas were dashed at the Summit of Americas last month amid violent anti-trade protests.
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COUNTRY TO WATCH: JAPAN
The Japanese economy is showing some sustained growth after 15 years of recession and false starts.
The country’s growth rate is tepid and concerns remain for the world’s second largest economy. But the news from Japan is providing optimism for exporters.
Japan already is Orange County’s second-largest buyer. In 2004, it bought more than $1 billion in OC goods, an 11.5% share of the county’s exports.
“The Japanese economy has been down for so long,” said Anil Puri, co-director of the Institute for Economic and Environmental Studies at California State University, Fullerton. “When economies recover from a slump and the recovery is very rapid, the rate of growth is very high.”
The Japanese economy grew 2.7% in 2004. It’s expected to grow 2% in 2005 and is set to match that in 2006, according to the International Monetary Fund.
Investors are seeing a sustained turnaround: The Nikkei,Japan’s most widely watched stock index,recently hit a five-year high.
A big driver of Japan’s growth is the banking system.
“The banks, which have been a drag on this whole thing, have cleaned up their portfolios,” said Robert Brasch, president of Pacific Partners Inc., a Beverly Hills consulting firm that helps U.S. companies crack the Japanese market. “They’re lending again.”
The strength is spurring optimism among consumers. That should lead to more demand for U.S. goods, including those from OC, Brasch said.
“I see a lot of consumer confidence in Japan,” he said. “2006 is going to be a very good year.”
,Brian Womack
