Weakening dollar strengthens export market

Currently the dollar is as weak as it’s been in years. But that can be good news for American exporters, said Bill Rohlf, Drury University economics professor.

“What you’re seeing right now is that firms that export goods abroad are pretty darn happy that the dollar’s depreciating,” Rohlf said. “But people that have to buy things abroad are hurting.”

The happy group includes Springfield-based Positronic Industries and its president, John Gentry.

“The cheaper dollar means that when our customers think about what it’s costing them, it’s actually going down in price,” Gentry said. “In their currency – say it’s the euro – if they’re buying (our product) in dollars … they’re actually paying less money for it, so that’s a definite advantage.”

Positronic sells its products – mostly electronic connectors – in Canadian, European and Asian markets. Gentry said international markets buy about 40 percent of Positronic’s product generating roughly $20 million annually. He said that about half of his company’s growth in international sales this year can be linked to the dollar’s relative weakness.

But a weak dollar doesn’t always translate into increased sales.

“It’s kind of a two-edged sword,” Rohlf said. “When the dollar depreciates, our products become cheaper, so it makes it easier for us to sell our exports. Unfortunately for businesses that import raw materials or inputs that they use in manufacturing finished goods, those things will become more expensive for them.”

Springfield investment advisor Eric Peterson said the dollar could have an impact on the average consumer who doesn’t deal internationally.

“Certainly with foreign goods, i.e. automobiles, electronic equipment, consumer durables, it has an offsetting effect on the fact that the foreign labor markets are less expensive than the U.S. market,” he said. “Their goods can be produced cheaper, but because of the weaker dollar, their goods are more expensive (in the United States), and therefore perhaps less in demand than domestically produced goods and services.”

One problem with relying on a weakened dollar is that it’s nearly impossible to predict what the dollar will do in the future, though many economists will try.

“I think you’re going to see the dollar continue to depreciate for a while,” Rohlf said. “What tends to happen is, as our economy picks up steam – and it’s kind of an iffy proposition as to whether or not it’s doing that right now – as American consumers continue to get more income, they’re going to spend part of it abroad. That’s going to mean more demand for foreign goods and services, and that will weaken the dollar even further. That would particularly be the case if foreign economies continue to lose steam, meaning they’ll be able to buy less of our stuff. And that would be the dynamic duo to depreciate the dollar even further.”

Peterson said investors should be careful when investing abroad.

“I’m cautious these days of placing new investor money into international and global funds, because those are also very expensive right now,” he said. “Should the dollar re-strengthen soon, it could be difficult to reap positive gains from those investments.”

When the dollar does come out of its global slump, Gentry said it could be trouble for companies like his. “The advantages it’s giving me now, it’s going to give me the same disadvantages later on,” he said.