Connecting Massachusetts to the Global Economy Thank you to our - - PowerPoint PPT Presentation

Connecting Massachusetts to the Global Economy

Thank you to our sponsor

#MassEconAC

Connecting Massachusetts to the Global Economy

Michael Dolega

Director & Senior Economist TD Economics June 2016

Global growth improving after rough patch, but risks remain

 Global growth is tepid, but accelerating  Chinese economy slowing, as it rotates  EMEs adjusting to lower commodity prices  AEs continuing stimulative monetary policy  Trade to increase with economic activity

– Would benefit from trade deals (TPP, TTIP) – Rising protectionism remains a risk

 U.S. growth robust in relative terms, lifting

dollar and weighing on exports

3

1 2 3 4 5

GDP (U.S.) GDP (Adv. ex. U.S.) GDP (EM/Dev.) GDP (World) Trade (World)

2014 2015 2016 2017

y/y % chng.

Source: IMF, TD Economics

Goods exports weakened, but state less exposed

 Mass. goods exports not immune to recent

slowdown, down 8% last year, but faring better recently up 6% in Q1 from a year ago

 State exported $25.2bn in goods in 2015, or

6% of GDP and lower than 10.5% nationally

– Middlesex ($9.1bn), Essex ($6.4bn), and Norfolk ($4.0bn) account for more than 2/3rd

• f all goods exports from the state

 Mass. goods exports lagged during recovery

– Destination: Europe (40%) and Pacific Rim (30%) are top export markets – Industries: low exposure to auto, oil, etc. – Price effects: gold, IT products, etc.

4

70 80 90 100 110 120 130 U.S. U.S. (Real) Mass. Merchandise exports; Index (=100 in 2008)

Source: BEA, Census Bureau, TD Economics

Forecast

Export outlook better for higher value-added goods

5 Electronics, 28.9% Medical devices, 8.9% Pharma, 8.1% Machinery, 5.4% Chemicals

• ex. pharma,

12.6% Other, 36.1%

Massachusetts goods exports

Electronics, 13.6% Medical devices, 2.2% Pharma, 3.9% Machinery, 9.0% Chemicals

• ex. pharma,

9.2% Other, 62.1%

U.S. goods exports

Source: Census Bureau, TD

 Despite relatively small share, Mass. goods

exports hugely beneficial on high value-add

– High-tech: electronics and computers (30%) – Health care: pharmaceuticals and medical devices (17%) – Machinery and chemicals (18%)

 U.S., and Mass. in particular, tend to have

competitive advantage in many high-value added goods given human capital, strong IP protections, etc.

 Outlook for higher value-added goods

(pharma, electronics, machinery, aerospace) is bright and Mass. stands to capitalize

Service exports resilient and outlook very bright

6

 Unlike goods, services exports continued to

expand despite the global slowdown and sky-high U.S. dollar

 Value of service exports doubled since 2005  This is particularly important for Mass. which

is highly-exposed to services exports

– Estimates suggest that Mass. exported more than $25bn in services last year, exceeding value of int'l merchandise shipments – Nationally, service exports make up only 1/3rd

 Outlook for services exports is especially

bright, given the evolving global economy

80 85 90 95 100 105 110 115 120 2010 2011 2012 2013 2014 2015 2016 2017 Total Goods Services

U.S. export volumes; index (=100 in 2014)

Source: BEA, TD Economics

Forecast

• Mass. stands to benefit from future trade agreements

 Currently FTAs with 20 countries, covering

47% U.S. and 31% Mass. goods exports

– Exports to FTA countries outpacing those to non-FTA nations

 TTIP and TPP deals currently negotiated

could extend free market access to additional 15% of U.S. and 33% of Mass. goods exports, removing sizeable tariffs

 These trade agreements would also benefit

• Mass. by removing barriers to services trade,

improving regulation and setting standards for trade in services

7

100 200 300 400 500 600 700 800 1999 2001 2003 2005 2007 2009 2011 2013 2015 Other Bus. Svc. Finance & insurance IP Charges Telecommunications Misc Transport & Travel

U.S. service exports; $ millions

Source BEA, TD Economics

Thank you

For more research and forecasts visit: www.td.com/economics Or follow @TD_Economics on

8

Connecting Massachusetts to the Global Economy

Thank you to our sponsor

#MassEconAC