Newspaper article The Christian Science Monitor

Dollar's Value Gives A Boost to Exports

Newspaper article The Christian Science Monitor

Dollar's Value Gives A Boost to Exports

Article excerpt

THERE'S certainly one bright spot in the current sluggish economic setting in the United States - exports.

Despite a drop in exports in August, that's the view of a number of analysts here, including George Iwanicki of Kidder, Peabody & Co., and Dr. Robert Barbera of Shearson Lehman Brothers Inc. Dr. Barbera, for example, says that the current environment of slow economic growth and relatively low inflation means that the US will retain a very "competitive position" on merchandise trade. US exports, he concludes, will remain "firm."

Similarly, Mr. Iwanicki's argument has more to do with favorable currency valuations than just the quality of US products, although many US products - such as in aerospace, chemicals, and computers - are sought for their excellence.

The overriding advantage for US exports continues to be the value of the dollar vis-a-vis other currencies. Although the dollar rose in value against other currencies during the first half of 1991, the dollar, "on an export-weighted value," argues Iwanicki, remains low relative to its levels in the mid-1980s. Export-weighted dollar values are "dollar exchange rates adjusted for relative inflation differences and weighted by export shares for each industry." Thus, Iwanicki concludes that despite the 4.4 percent rise of the dollar since February, the export-weighted value of the dollar was only 0.2 percent higher in August than it was a year ago.

Recent dollar rises, in fact, have been uneven. While the dollar recently rose against the currencies of Germany and other European nations, the dollar gains were "modest or nonexistent" against such major US trading partners as Canada, Japan, and Mexico.

The distinction is crucial to why US exports are doing well, Iwanicki says. Canada is the major trading partner for the US, accounting for more than 21 percent of all US exports (in dollar terms), Japan for over 12 percent, Mexico for 7 percent, and Continental Europe, 19 percent.

Still, there is some concern about the impact of slower overseas growth on the US manufacturing sector. …

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