U.S. export growth is running up against a Big Fat Greek Problem.
The Commerce Department is expected to report Wednesday that the U.S. trade deficit widened slightly in December to $36.8 billion, according to forecasters polled by Dow Jones, compared with $36.4 billion in November.
The widening reflects faster growth in imports than exports at year-end, an unwelcome side effect of the U.S. economic recovery. It also is a reminder that export-led growth, which nations are pursuing as a path out of recession, is easier said than done.
President Obama has called for a doubling of U.S. exports over the next five years to help narrow the trade deficit and spur economic growth.
The quickest way of doing so is a weaker dollar, which makes U.S. goods and services cheaper in the global market.
But lately, the dollar is moving in the other direction.
Worries over the fiscal health of Greece and other nations have dogged the rival euro currency, which hit an eight-month low on Tuesday before closing a few cents higher.
The U.S. Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, has risen about 7.5% since last November to close Tuesday at 79.79.
Goldman Sachs economist Sven Jari Stehn calculates that even with above-consensus global growth of 4.5% over the next five years, the dollar still would need to depreciate in inflation-adjusted terms by about 30% for U.S. exports to double to about $3.1 trillion.
If instead the strengthening continues, "it would wipe out all the other bits and pieces [the president] is putting together to encourage exports," said Simon Johnson, a professor at the Massachusetts Institute of Technology's Sloan School of Management.
And while investors focus on whether the big European nations will come to their smaller neighbors' rescue, Mr. Johnson points out that Germany, the world's biggest exporter until China surpassed it last year, is reaping the benefits to its own exports that come from a weaker currency.
European nations might not be in as much of a hurry as investors assume to halt their currency's downward slide. That could make an export-led U.S. recovery its own Greek myth.
Retrieved from http://online.wsj.com/article/SB20001424052748704182004575055740459068982.html, 2/11/2010
I bet when people think about Greece, they do not see her as a nation in debt, rather a beautiful country with the purist white and blue. At least for me, Greek names and mysteries are ancient and pretty. I guess this is the dark side of economics, sadly.
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