FOUR FACTORS WILL CONTINUE THE EXPORT SECTOR SURGE

"There have been new records set in exporting every month for over two years, and in July the U.S. even managed to make some inroads on its trade deficit," says Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association, Intl (FMA; Rockford, IL). "The reason for all this activity is obvious: a weaker dollar has meant that virtually every U.S. good is being sold overseas at a 30 percent discount. This helps manufacturers get past high tariff barriers, consumer resistance, and competition to build volume in foreign sales.

"Many ask what happens when the dollar starts to recover," Kuehl adds. "Granted, this may take a while, but recently the Euro sank a little as analysts in Europe noted that its central bank is getting a little nervous about growth. So, will there be an export boom when the dollar regains some of its luster?"

Kuehl resoundingly answers yes, and in the current FMA economic update newsletter Fabrinomics?, he details these four key reasons to think so:

1. Energy Costs. "The current system of export trade is predicated on costs of transportation as they were ten years ago," explains Kuehl. "Those days are gone, which will place more emphasis on being closer to one's supply chain. This means U.S. manufacturers will see more business across the borders of the United States – both coming and going. The nations of Latin America will become more complete customers for the U.S."

2. Increased Sophistication of U.S. Manufacturers Overseas. Companies that started with some tradeshow and Internet orders have often taken this to the next level, according to Kuehl. There are sales organizations in place, contacts have been made, and overseas consumers now have experience and familiarity with U.S. products. The weak dollar allowed a foothold, and companies have leveraged it from there.

3. Changes Among Foreign Manufacturers. "Changes have occurred in countries that have evolved as manufacturing bases," Kuehl says. "They are experiencing the challenges of development: higher inflation, shortage of qualified workers, shortage of management skill, and societal demands that could affect their competitiveness. The advantages that these countries once had in terms of production costs have been eroding, bringing these nations much closer to U.S. and European costs than before."

4. More Money in Overseas Markets. "With more money in overseas markets than there used to be, global consumers are interested in and have the wherewithal to buy U.S.-made products," Kuehl explains. "The old markets used to be confined mostly to Europe, but now there is demand from Latin America, South Asia, East Asia, and even from parts of Africa.

"The ability of consumers in most of the world to afford U.S.-made products has expanded dramatically and created a whole new set of opportunities in countries that only played marginal roles in the past," he adds.

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Fabricators & Manufacturers Association, Intl 833 Featherstone Road, Rockford, IL 61107, 815-399-8775, Fax: 815-484-7700, www.fmanet.org.