Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Can Exports Save US Economy from Recession?

Economics / US Economy Sep 01, 2008 - 11:14 AM GMT

By: Money_and_Markets

Economics

Best Financial Markets Analysis ArticleJack Crooks writes: Since the start of the U.S. housing downturn we've been told that consumers were in trouble. After the subprime market shakeout we were told our economy was in trouble. And after credit tightened up we were told to expect an inevitable U.S. recession.

But yet ... we're not in a recession. At least not technically speaking since that is defined as two quarters of negative GDP growth.


In fact, a preliminary report on U.S. GDP out earlier this week showed growth of 3.3% in the second quarter over the first quarter.

What's keeping this economy out of the recessionary frying pan? One word: exports.

The Export Market Has Kicked into High Gear ... Effectively Supporting the U.S. Economy

Exports to developing countries in Asia and Central American are zooming!
Exports to developing countries in Asia and Central American are zooming!

The U.S. dollar's fall to record lows as recently as mid-March has helped make U.S. exports more affordable this year. And the obvious conclusion to draw is: Now that the U.S. dollar is appreciating, U.S. exports should begin to taper off in lock-step.

But the composition of U.S. exports is changing ... for the better.

In the 6-month period ending in June of 2008, U.S. exports to Asian and Central American countries jumped by 22.6% and 21.6%, respectively, from the similar period a year ago. And for the 12 months ending in June, U.S. exports to those regions rose faster than everyone's darling — China.

So what's behind the surge in U.S. exports to emerging markets in Asia and Central America? The simple reason is that many emerging markets are stepping up to become more industrialized economies and they're looking to the U.S. to provide the necessary capital goods.

That means demand for U.S. products isn't going to be squashed ... even if the U.S. dollar keeps strengthening .

Will Resilience, Productivity, and Optimism Prevail?

What about those who refuse to believe the U.S. economy is resilient and flexible enough to skirt recession?

Here's what Brian Wesbury, chief economist at First Trust, has to say about it:

"In response, the economy has remained resilient for a generation; overcoming without great difficulty threats like the 1987 stock market crash, the S&L crisis, the rapid decline of oil prices in the 1980s (think Texas), the rapid rise of oil prices in the 2000s (think almost everywhere else), 9/11, hurricanes Katrina and Rita, and the Asian Contagion, along with the collapse of Long-Term-Capital Management. Since 1982, the U.S. economy has been in recession just 5.2% of the time, versus 31% of the time between 1969 and 1982.

"This does not mean there is no economic pain. A high productivity economy will often generate problems for those whose skills are becoming obsolete. A skill acquired by age 20 or 25 is no longer going to last a lifetime when the world is changing so rapidly. It might not even last a decade. And companies face competition from new entrants using radically different technology (think traditional newspaper classified ads versus Craigslist). This forces businesses to work harder at squeezing out operational inefficiencies, potentially resulting in job losses, even during periods of strong economic growth.

"But year by year, and decade by decade, productivity growth is the key source of rising standards of living. It's what makes it possible for us to live longer and better than our parents; it's what makes it possible for our children to live longer and better than we do."

I agree. And recent polls support Mr. Wesbury's view. Indeed, respondents are revealing optimism when questioned about their individual situations.

While regular consumer sentiment surveys became slightly more optimistic in the most recently reported period, 76% of those Americans recently surveyed in a Quinnipiac University poll felt that their family's financial situation is either "holding steady" or "improving." Whereas that same poll showed 87% of respondents felt the nation's economy is either in "not-so-good" or "poor" condition.

Sure, consumer spending isn't where it was during the most recent economic boom. Sure, the employment situation has softened more than we'd like to see. And sure, foreclosures are steamrolling over the real estate market.

Maybe recession is a foregone conclusion.

But even if that's the case, the dollar is holding up rather well. The U.S. Dollar Index has broken above its weekly downtrend line going back more than six years.

Exports to developing countries in Asia and Central American are zooming!

And with oil prices pulling back and exports soaring, things are getting more interesting by the day. Is the buck anticipating a softer landing for the U.S. economy? Stay tuned ...

Best wishes,

Jack

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Wintermute
01 Sep 08, 17:06
Magic of Hindsight

The magic of hindsight. So the US$ pokes above it's 7 year decline trend (resistance) line.

The same could have been said in Q3 2005 some 4 years in. It rallied somewhat - so the downslope is moved and hey presto we see a breakout today. In 3 years time if the dollar index is 60 then the line will be moved to a gentler slope and the recent breakout will be below trend again...


Post Comment

Only logged in users are allowed to post comments. Register/ Log in