In 2010, President Obama set a goal of doubling exports in five years. Now it looks like we are not going to make it:
U.S. exports are on track to decline this year for the first time since the financial crisis, undermining a national push to boost shipments abroad. Through July, exports of goods and services were down 3.5% compared with the same period last year. New data released Tuesday by the Commerce Department showed that exports of U.S. goods sank a seasonally adjusted 3.2% in August to their lowest level in years.
But what is bad news for producers, is good news for consumers:
As unemployment has declined, American consumers have reasserted their dominant role in driving economic growth.
And with the Fed set to raise interest rates, it is likely that the dollar will get even stronger:
Fed Vice Chairman Stanley Fischer in August said it was “plausible to think that the rise in the dollar over the past year would restrain growth…through 2016 and perhaps into 2017.” If the Fed begins to raise short-term interest rates later this year, that could provide new fuel to push the dollar’s value even higher.
Given that other countries are experiencing currency devaluation, the continued strength of the dollar could hurt exports from the US, but will help imports.In a way, this is actually a bad thing as it fosters the mentality to buy more overseas as you can get more for your money. (That is, of course, without concern for quality.)
ReplyDeleteThis is a timely topic given Obama’s efforts with the Pacific Rim trade deal. This trade agreement basically outlines a new platform that allows for increased imports and exports among the countries. There will be complex rules put in place that will protect the propriety rights of certain industries and products. This agreement will also limit China’s influence in the Pacific region as well. Overall, I do see that this deal can be a boon to the US economy with increased trade exchanges. Unfortunately, Obama is not likely to get credit for it as the increased exports and lasting impact will not be known immediately.
ReplyDeleteReferences:
http://www.wsj.com/articles/u-s-reaches-trade-deal-with-11-pacific-nations-1444046867
With the federal interest rate increase put on hold again due to high unemployment, it is not likely that the dollar will get much stronger since the unemployment rate is a major factor, and hat rate seems to be unchanged. The reports of the unemployment rate are skewed, as many people have given up searching for work altogether. There is the rate at which people are searching for work, and then there is the rate at which people have given up looking for work. Only one type of person, the one who is looking for work, is counted as part of the unemployment rate. This is troubling that an inaccurate figure is being used to determine federal interest rates.
ReplyDeleteWith the Federal interest rate increase still looming, there seems to be some uncertainty in regards to how much stronger the US dollar can be. It is a shame how when such a topic with the reverse effect was evident in the past, as the US dollar was taking a significant hit, would have some negative economic happenings. I agree with the above post, if less people are looking for a job and registered with unemployment, then how accurate can these statistics be in regards to the interest rate. People may have found work off the books too, which would further scue the unemployment statistics, yet boost the economy at the same time.
ReplyDeleteIt might be hurting exports, but personally it is highly beneficial for many people and as a trader I wish to continue watching this go. I am doing Forex trading and with OctaFX broker, I am always able to get these type of news update without making much effort while it’s provided on daily basis without any charges or any extra fees in any way at all, so that’s why it’s really ideal choice for me to be aware of all the happening in the market.
ReplyDeleteAfter reading much of the commentary, it is clear that the increased valuation of the dollar will potentially stifle the United States exports. Although this conversation primarily focuses on the United States valuation, there are many other competitors/marketplaces that continue to affect the United States. Most recently, China’s currency continues to be devalued, which will affect the amount of exports leaving the country (Doerer, 2015). Lower valued currency will translate to higher amounts of exports and a decline in other economies depending on respective exports. As the second largest economy, it can be assumed that any thing that China does will alternatively affect the world marketplace.
ReplyDeleteReferences
Doerer, Kristen. (2015). “Your guide to China’s devaluation of its currency”. PBS NewsHour. http://www.pbs.org/newshour/making-sense/whats-happening-chinas-currency/
I agree with many bloggers here, be wary of making any determinations that include the unemployment rate as a factor. The rates are defiantly skewed due to the fact that many people have simply giving up looking for work or are working off the books, but there is another factor to consider here; the underemployed. I was just thinking today that I have over 20 years of experience, I am also about half way through both my MBA and Six Sigma certification. You would think that I should be able to find a job if I had to, but I am not so sure. I just did a quick search of job openings in my industry and could not find one opening for my position within driving distance. Right now a move is not feasible, so what would I do? I would probably be forced to take a different job, out of my industry. I may have to go from my nice management job at a big a company, to working the floor at Home Depot. This would be honorable work for sure, but it would also be a big pay cut for certain. I may have to join the ranks of the underemployed. I would still live and get bills paid, but I would cut costs down to the bare necessities. I would also become very sensitive to pricing. My personal U.S. dollar would become very weak! There are a lot of folks out there in this situation; their plight has to be considered in this conversation. Sadly I know too many people facing this exact challenge right now and I am always amazed at the reports of about the strengthening economy that is driven by the declining unemployment rate. I just don’t see it, but I do see many empty store fronts in my town!!
ReplyDeleteJG