Europe's financial flu is giving the rest of the world a cold, and U.S.
companies, including those in Virginia, are feeling it.
Six of the 17 nations that use the euro currency are in recession as
Europe's debt crisis has worsened in the past few months.
In the U.S., corporate profits have been one of the few bright spots in a
lackluster economic recovery and exports had been a strong force in the
recovery.
Yet the deteriorating financial condition in Europe has been weighing
down some U.S. companies' profits.
Some Richmond-based companies with significant international business,
including packaging maker MeadWestvaco Corp. and fuel additives maker
NewMarket Corp., have cited softness in the European market as a concern,
though their earnings have not been heavily affected.
For instance, MeadWestvaco said demand of folding cartons for personal
care products in Europe has slowed.
Virginia has a "moderate risk" from a European recession, according to a
report in July from Wells Fargo Securities.
Financial woes in Europe are taking a toll on exports from Virginia to
Europe, which fell 7.8 percent in 2012's first quarter from the same period a
year ago, according to the Virginia Economic Development Partnership.
"There are some sectors (in Virginia) that are affected" by the
international slowdown, said Terry Rephann, regional economist for the Weldon
Cooper Center for Public Service at the University of Virginia.
Exports "are one of the pistons that has been driving what has been a
slow recovery and, if we lose that, then it could be troublesome."
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Total exports to Europe in the first quarter of 2012 were $1.07 billion,
down 7.8 percent from $1.16 billion in the same period of 2011, data from the
Virginia Economic Development Partnership show.
About 24 percent of Virginia exports were to the European Union, compared
to almost 17 percent to Canada and more than 10 percent to China, according to
research by the Federal Reserve Bank of Richmond drawn from sources including
the Census Bureau and Haver Analytics. Most of the exports to the EU were to
the United Kingdom and Germany.
"Coal is a big export and petrochemicals, computer and electronic
equipment and transportation equipment components. There are some
manufacturing sectors that would be impacted," Rephann said.
Virginia may be in a better position to weather a slowdown in Europe than
many other U.S. states, such as the Midwest, where manufacturing is more
export dependent, Rephann said.
"In Virginia, since we are oriented so much toward government and
services, we have a much smaller manufacturing economy and we have got less
exposure in terms of exports than a lot of other states," he said.
The down quarter came after exports to Europe for all of 2011 rose
slightly to $4.39 billion from $4.34 billion in 2010. The figures were lower
than the nearly $4.6 billion in exports in 2009 and $6.3 billion in exports in
2008.
The total impact of Virginia's global trade is difficult to measure
precisely, because much of what moves through the state's ports originates in
other states, blurring the numbers, Rephann said. Also, Virginia businesses
