The dollar rose threatening the recovery in the US manufacturing

Thu, 29 Dec 2016 09:49:41 AM GMT + 7    Print    Email Share:

(TBTCO) - The greenback rose to peak within 14 years after the victory of Donald Trump and the Fed's move, making US goods become more expensive overseas.
Boeing facing "little more business opportunities and intense competition". Photo source: WSJ.

The dollar strengthened as a threat to US producers when exporting their goods more expensive than non-border income and devalued.

The US currency - the currency has risen sharply in the last 2 years - reached a record in 14 years after the US presidential election and the decision to raise interest rates by the US Federal Reserve, is considered a added impetus to President-elect Donald Trump make the commitment to consolidate jobs for US workers.

Clearly, a stronger dollar is a sign of increased optimism for the US economy, the stock market also soared to new record levels. Prospects for inflation and rising interest rates to encourage investment into the asset class in the US, reflecting expectations of a higher profit.

Strengthening dollar also increased the purchasing power of money: If cheaper imports, American consumers have more money to spend. Whereby boost retail sales, a key driver of growth and increased confidence for the US overall.

However, while benefiting US consumers and companies to buy raw materials from abroad, the appreciation of the dollar promises will come to the US manufacturers depend on overseas business.

Many firms have begun to withdraw forecasted revenue and looking to cut costs. 3M and United Technologies have signaled they will have more difficulty in increasing its sales in 2017.

Kaman, a maker of aircraft parts, have seen prices provided by competitors in Europe decreased, while the value of the euro fell against the dollar. To compete, Kaman has invested in facilities in Germany and the acquisition of a company in the Czech Republic.

"Made in America has become challenging than we anticipated," said Neal Keating, CEO of Kaman said.

Some agents of the motorcycle company Harley-Davidson and Caterpillar bulldozer & excavator is facing competing firms being overtaken Japan in terms of price, thanks to the yen weakened against the dollar. Catepillar said weakening yen has made competition becomes tougher.

Some business leaders said the commitment to support his enterprise Trump will help shore up the negative impact of the strong dollar, especially when there are lower taxes and reduce regulatory burdens. They are expecting the plan to overhaul the infrastructure of Mr. Trump will create economic growth and that higher domestic sales will help offset the loss in exports.

The dollar has weakened relative to most world currencies over the past decade. This helps US exports to recover quickly after the financial crisis.

By the end of 2010, exports have reached record levels and continue to grow, reaching 598 billion dollars per quarter in 2014. Employment in the manufacturing sector started to return, and increasing optimism that the US might enter manufacturing renaissance.

Since then the dollar has strengthened against some currencies such as the Euro and Yen. Meanwhile, the pound falling after the vote in June decided to leave the EU. Earlier this month, the Fed raised interest rates and the implications will continue for years to come.

Bond yields have increased as have many expectations for growth and inflation under the government Mr. Trump.

For some companies, a stronger dollar also limited the intention to expand domestic production.

The renminbi (yuan) in China fell to the bottom in the dollar exchange rate in eight years, a development might entice manufacturers to maintain factories here rather than follow the steps the company has taken some American running back.

Mexico's peso has fallen 13% since the election, making the introduction of cross-border plants south became more attractive, despite Mr. Trump swore heavily fined companies that ship our jobs foreign.

Boeing, the largest US exporter, said last week, "little more business opportunities and intense competition," the company announced plans to lay off more staff in the commercial aircraft segment next year , after having cut 8% in 2016.

Boeing did not mention currency fluctuations, but helped the dollar gained strength for rival Airbus - for many years the company struggled with higher euro prices. An Airbus spokesman said the company benefits from the dollar is invisible because 40% of its aircraft parts must be purchased from the US.

Many manufacturers have started to cut the workforce; workers in the manufacturing industry dropped 51,000 people from January to March 11/2016 1/2015, according to data from the US Labor Department.

Ben Herzon, an economist at Macroeconomic Advisers longtime, an economic forecasting firm independently conducted simulating a 10% increase in the strength of the dollar will sweep the American economy.

In the next three years, the company will gradually adjust and enhance production capacity at overseas plants, while reducing inland, change their supply chain or increasing automation.

If not stronger dollar, GDP after adjustment for inflation will total 6.3% increase in the next three years.If the dollar continues to strengthen by 10%, growth will decrease to 1.8%, according to the simulation of Macroeconomic Advisers.

Initially, American consumers are to benefit from paying less for the goods imported.

"It is good for consumers, as long as they work," he said Hezon. Time passed, benefits will be corroded by job loss in the manufacturing sector, he said. /.

According to Ming Wei / TC


  • By : TBTCO


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