The Export Boom: Will It Continue With Strong Dollar?

Much of the world may be struggling with the economic downturn, but life has been getting better in Columbus, Ind., Kingsport, Tenn., and Waterloo, Iowa. These out-of-the-way places have become trade hot spots as U.S. exports, fueled by the dollar’s fall, continue to provide a rare spark in an otherwise gloomy economy.

While many economists expect a recent snapback in the value of the dollar and a spreading global slowdown to soften that growth, exports have become a key to greater local prosperity more than at any time in decades.

“Exports are impacting, in a positive manner, virtually every industry and every state,” says Daniel J. Meckstroth, an economist at the Manufacturers Alliance/MAPI, an Arlington, Va.-based public-policy and research group that represents mostly large manufacturers.

Foreign buyers are scouring the U.S. for everything from guitar strings and wine corks to used dump trucks and newsprint. The volume is so great that some inland trade hubs can’t find enough metal shipping containers to load products headed overseas.

Over the past year, real-goods exports have risen $115 billion, or 12%, and are up across every major category. They now make up nearly 13.5% of gross domestic product, the highest percentage since World War II (see chart above).

It’s a badly needed tonic for the beleaguered U.S. economy. A smaller trade gap, due to growing exports and slowing imports, combined to add 3.1 percentage points to the GDP’s growth rate in the second quarter. The latest report from the Institute for Supply Management also showed that while manufacturing as a whole shrank slightly in August, the index for export orders, an indicator of future export business, rose to 57 from 54. ISM readings above 50 indicate expansion.

Key to this growth has been the weaker dollar, which has made American goods more competitive in global markets and prompted many manufacturers to expand production inside the U.S.

~Wall Street Journal

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Comment by Back from Hamptons

2008-09-11 11:49:31

Exports may not have such a strong showing if dollar continues to go up but a dollar stabilization is good in a broader sense.

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