15 states feel Europe’s economic pain

The European recession will have little impact on the District of Columbia, but it could hit states particularly hard that rely on exports and tourism.

While most of the country is shielded from Europe’s recession by relatively low investment in the continent, some states such as Utah and South Carolina have more to lose than others, according to a study by Wells Fargo Securities.

“With many states continuing to struggle with the effects of the sluggish U.S. economic recovery, the prospect of some additional challenges as the European Union slips back into a recession over the next couple of quarters represents another hurdle,” the report said. “Slower demand from the Eurozone will likely slow production among the country’s commodity, aircraft and automobile producers.”

The study measured the percentage of each state’s gross domestic product that comes from exports to Europe. The country’s average was 1.97 percent, which is low and won’t have much of an impact on the economy. But the 15 states that come in above the national average should be concerned, the study says.

Those states include Utah (5.56 percent), South Carolina (4.10 percent), West Virginia (3.90 percent), Louisiana (3.47 percent), Kentucky (3.10 percent), Connecticut (2.96 percent), Indiana (2.92 percent), Washington state (2.83 percent), Massachusetts (2.82 percent), Delaware (2.78 percent), Alabama (2.55 percent), Nevada (2.37 percent), Texas (2.20 percent), New Jersey (2.20 percent) and Tennessee (2.11 percent).

Utah could be the biggest loser. The state is a big exporter of commodities such as gold and silver. They make up 52 percent of the state’s total exports.

“The sharp run-up in the price of gold in recent years accounts for much of the recent growth in exports,” the study explained.

The state’s other top exports include computer memory, miscellaneous food preparations, molybdenum, a silver byproduct, aircraft engines and automotive safety bags. Much of its exports go to the United Kingdom.

West Virginia, on the other hand, is a big exporter of coal. Nearly 4 percent of the state’s GDP comes from coal exports to Europe.

“West Virginia is also among the states that will likely be affected due to commodities exports to Europe, particularly in coal production,” the study said.

States that export automobiles and automobile parts, as well as aircraft and aircraft parts, could take a hit. “South Carolina and Alabama are among the auto producing states that have somewhat strong ties to Europe,” according to the study.

Those two states could also face foreign direct investment questions. Major international companies have built plants there, such as BMW in South Carolina and Thysen-Krupp plant in Alabama. While these plants are not likely to go away, it might be hard to attract more investment in the areas.

To a lesser extent, the European recession could also affect demand for services like tourism, finance, entertainment, software and engineering in states like New York, California, Washington state, Florida, Texas and the Carolinas, according to the study.

Tourism, in particular, could slow down from there to the U.S., as fewer Europeans would have the finances to afford trips to cities like New York City and Washington, D.C., or states such as California and Florida.

“International flying is a key growth area,” said Steve Lott, a spokesman for Airlines for America, an industry trade group based in the District.

“The airline industry today is more global than it’s ever been,” he added. “So certainly the airline industry is keeping a close watch on the state of European economies. If European economies deteriorate further, that could have a ripple effect on demand for tourism.”