Rising dollar doesn't diminish U.S. manufacturing might

It’s hard to believe that it’s been almost a full six years since the start of the Great Recession, and everyone is still looking for the economy to hit on all cylinders.

While we wait, I try to look for what might lead up to the next economic downfall. Will it be the fervor surrounding “new” economic thinking that has no real basis in fundamental economics—like the dot-com bust of the early 2000s? Will it be another real estate collapse as people speculate with borrowed assets, which led to our most recent downturn? Could it be an event like 9/11?

The only thing that has left me scratching my head is the growth of the domestic automotive industry. Forecasts are calling for sales of nearly 17 million cars in 2015, which is amazing in the sense that wage growth really hasn’t taken off with the slight improvement in U.S. economic numbers. The one trend that has emerged are crazy loans, such as the 72-month arrangement, which can put fannies in new car seats. Of course, cars are easier to repossess than homes, so this can’t be too big of a threat to the U.S. manufacturing economy.

World events are always scary, but when has there been sustained peace in the world? Small “lone wolf” attacks may occur in North America, but the economy is resilient enough to move forward.

What stands out in recent headlines, however, is the appreciation of the U.S. dollar. This has the potential to affect this country’s export efforts, which have been an integral part of the improving economy.

The euro reached a 12-year low against the dollar this week, and the European Union and other countries continue to take steps to weaken their own currencies in an attempt to jump-start their own moribund economies. If it were not for the fact that the U.S. was engaged in similar practices for much of the past several years, it might have a valid reason to be outraged at what’s going on. As the Fabricators & Manufacturers economic analyst Dr. Chris Kuehl mentioned in his “Armada Business Intelligence Brief” on March 12, “It can be argued that rates would have gone up months ago were it not for the dollar strength and other economic trends taking place in the U.S.”

Although the trend doesn’t suggest impending economic doom for the U.S., it does mean that exported goods are more expensive for those in other countries. That’s likely more of a speed bump rather than a sinkhole, however.

U.S. manufacturers aren’t supplying simple goods to overseas markets. From a metal fabricating perspective, shops that are exporting metal assemblies or end products have a lot of engineering know-how and fabricating skill embedded in those items. Those products exported because the purchasers probably likely can’t find someone near them to replicate such metal fabrications.

A rising dollar won’t be the end of the U.S. exporting efforts. It just means that customers will have to pay more for manufactured goods that they may not be able to find easily anywhere else.