Sep 09 2009
USA Export: The recession will be over
USA export products are poised for good times! The governments all over the world want us to believe that the recession is over. The manufacturing indices of most countries have been steadily increasing this year, month after month. According to the Institute for Supply Management, the US manufacturing index is leapfrogging to 52.9% in August. That’s more than 8 percentage points better than it was in June.
Now that the lethargic summer months are gone, it’s back to work as before. Eleven of the twelve regional offices of the Fed suggested an encouraging sign: the economic activity has begun to stabilize. If the US economy really starts growing in the second half of 2009, then the longest recession in 65 years will have ended.
How about some more good news: the US Dollar is losing strength and that’s good for USA export products. Yesterday and today one USD bought Euro 0.68. Year after year, the USD stays stronger during the summer and as soon as September comes around it’s value decreases (see: http://www.xl-group.us/files/Currency_Exchange_Matrix_Table5.pdf). This means that a manufacturer who wants to expand needs to look at export markets. USA export sales may become easier than domestic sales. Because the USD is so cheap, Europeans would pay only 68% for an American product compared to a similar European product. Although, the Europeans may suffer as much as the Americans, they get a better deal buying American products when they do buy.
That is likely to get even better for exporters. The stimulus package the government promised earlier this year has caused the US Dollar Index to lose more than 10%. International investors believe that the USD is not as good an investment any more and therefore place their money in other assets. Although Timothy Geitner continues to assure domestic and foreign investors that their investments in the US are safe, he is unable to prevent them (in the case of the Asian countries) to sell off big chunks of debt they bought from the US. And that’s very good for the USA export.
