What Is The Dollar Doing to Exports?

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We’ve been hearing from our export customers that the exchange rate is making buying our machines difficult at the moment.

Wondering if this anecdotal evidence can be verified by the data, I took a look at some trustworthy sources to really see what is happening with US exports.

The World Bank puts US exports at 13.5%, or $2.35 trillion, of US GDP in 2013. That comes out to $7,369 for every man, woman, and child in the US.  That’s a big chunk of the old American apple pie.

In 1995 exports made up 10.6% of US GDP. By 2004 that figure dwindled to 9.6%, but quickly rose to 12.5% in 2008 and has held fairly steady or climbed since that time (source: World Bank).

The largest single recipient of US exports is Canada, while Mexico is the third largest recipient.  From the graph below we can see that US exports to these two countries have had many ups and downs since 2005, but there is a general upward trend.

US Exports

Clearly there was a big drop in exports to both countries starting in the Fall of 2014 for Mexico and the early part of 2015 for Canada.

Zooming  in on January 2014 to August 2015 we can see there is a downward trend in US exports to Canada.

Exports to Canada most recently peaked in October 2014 and then fell by 18.5% by August 2014.  At the same time the value of the US dollar rose by 18.3% versus the Canadian dollar.  That seems to tell a story!

Exports to Canada 2014-2015

US Dollar Vs Canadian Dollar

 

And US exports to Mexico also most recently peaked in October 2014 and dropped 12% by August 2015.  The US dollar rose nearly 25% over the Mexican peso during this time.  While the dollar has risen quite dramatically in value against the peso, exports haven’t dropped as closely as they did with Canada. I’m sure there are some explainable economic reasons that would shed some light on why, but I’m definitely not an economist with a flash light.

Exports-to-Mexico-2014-2015

PESO vs USD

So it really seems like our customers are telling the truth – our prices are too high!

Since 13% of the US economy depends on the sale of goods outside our borders, we’ll definitely be keeping an eye on the value of the US dollar.

 

Image courtesy of khunaspix at FreeDigitalPhotos.net

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