Monday, December 27, 2004

Economic theory says that a falling dollar should increase US sales abroad, reduce the trade deficit, and lead the charge in rebalancing the global economy. As a result, the General has been scouring the globe in search of some evidence that nearly three years of a falling currency might have had some significant effects on boosting US exports.

All weekend, Bloomberg has been running a story on the falling dollar in various forms. All of them, however, contain more or less the same tiny blurb which goes something like this:
H.J. Heinz Co. and Deere & Co. are among U.S. companies to benefit from a weaker currency. Heinz, the world's biggest ketchup maker, said the dollar's decline boosted revenue from abroad in its second quarter. Deere said overseas sales of farm machinery jumped in the quarter ended Oct. 31.
Could this daresay be our elusive evidence??

The Heinz 2004:II quarterly report tells us
Sales for the three months ended July 28, 2004 increased $107.5 million, or 5.7%, to $2.0 billion. Sales were favorably impacted by volume of 1.9% and exchange translation rates of 4.0%.
That's a big push from the falling dollar. But is this due to rising Heinz exports? No. In fact, Heinz has more production facilities in Europe than it does in North America and as far as I can tell doesn't export much if anything out of North America. The weaker dollar helps Heinz's bottom line, and it helps keep US finanical income slightly positive, but it does nothing for the much larger trade deficit.

How about John Deere selling all that farm equipment abroad in 2004:IV? The quarterly report says that
Worldwide net sales and revenues grew 32 percent to $5.207 billion for the fourth quarter
Again, a nice number that's nothing to shake a stick at. The two biggest markets for Deere are [1] United States and [2] Europe, Africa and the Middle East, together making up 84% of the company's total sales in 2003. While US plants may be exporting equipment to Latin America and Asia, it seems unlikely that Deere is servicing its big European market from the US. 40% of Deere's equipment operations employees work outside North America and the corporation operates major production facilities in both Germany and France. Deere exports from the US ran only 4% higher in nominal dollar terms in 2003 than in 2002 (no 2004 data yet) and this during a year in which the dollar (real broad index) fell 6% (isn't culling Annual Reports fun?).

The falling dollar seems to be plenty good news for Corporate America's bottom line in that profits gained in euros can be turned into dollars to the glee of Wall Street investors. The falling dollar doesn't seem to be doing much at all for Heinz and Deere exports, however, and thus nothing much for US jobs or the US trade deficit.


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