US Exports Are in Top Shape

12/04/2007 12:00 am EST

Focus: MARKETS

Knight Kiplinger

Editor-in-Chief, The Kiplinger Letter, Kiplinger's Personal Finance, and Kiplinger.com

Knight Kiplinger, editor-in-chief of Kiplinger's Personal Finance, says the weak dollar's silver lining is the boom of US exports, which should continue for some time.

Let's hear it for solid export gains!

They're in full bloom just as economic burdens of housing and credit woes plus energy costs are making consumer and business spending wilt.

Exports will buoy the 2008 economy. They're expanding faster than imports and will generate half of the 1.5% to 2% growth we expect. That's up from one-quarter of gains in 2007, the first time since 1995 that exports made a positive contribution to annual gross domestic product (GDP).

A kinder, gentler trade gap is on tap. It'll amount to about 3.8% of GDP in 2008, the smallest share of GDP in seven years and down substantially from this year's 5.1%.
 
Thank global growth and the weak dollar for America's most recent export surge. The greenback should soon hit its lowest level, on a trade-weighted basis, since the currency began to float freely in the markets in 1973.

The low buck will have a long tail. Even if the dollar were to start rebounding at this point, the lag effect of its six-year swoon would fuel exports for a few years. Why? It takes businesses a long time to adjust to currency changes. Finding new suppliers is easier said than done. That's why the weaker dollar didn't instantly boost sales abroad.    

Exports will be a welcome salve to many manufacturing industries, helping to slow the loss of jobs on factory floors. Leading gainers in foreign sales include autos and auto parts, civilian aircraft, chemicals and Rx drugs, information technology (IT) gear, and measuring and control equipment.

US companies are latching on to fast growing emerging markets. In the year through    September, exports to China were up 16% from the same period in 2006. Timken Co. (NYSE: TKR) of Canton, Ohio, is selling oodles of its specialty steel to China. US exports to Brazil are up nearly 30%, and to India...a whopping 65%. Caterpillar (NYSE: CAT) is cleaning up in Brazil, selling to mining and agricultural businesses. Boeing (NYSE: BA) has $13 billion in orders from India. Cisco (NASDAQ: CSCO) sells tons of networking gear there. Bottom line: US industry is in fighting trim, well able to muscle aside foreign competitors to maintain a top position on the leader board.

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