Weaker dollar could be good news for U.S. manufacturers

By Dave Carpenter
Associated Press

CHICAGO — Frequent traveler Dali Wiederhoft still loves Paris in the springtime. But the dollar's decline has added a new element of financial pain to her visits — one that American tourists vacationing abroad this summer may feel sharply.

Dali Wiederhoft felt the pinch of a weaker dollar on a recent trip to France. The weakening dollar could help U.S. businesses. Associated Press

Travel pains aside, economists say there are more U.S. winners than losers from the decline of the dollar. U.S. manufacturers in particular are benefiting from the greenback's descent against the euro and other currencies, getting a competitive boost for their products overseas that translates to higher sales figures and improved earnings for many.

"It is a real price advantage for us," acknowledged George Rolby, president of Sunnen Products Co., a machine tool manufacturer.

For that reason, there's no fretting by the government or economists about a phenomenon that might sound to the layman like evidence of fiscal frailty in what has long been the world's premier currency.

A four-year high for the euro against the dollar, which has tumbled about 10 percent since the start of the year? No problem. The trend may work against American travelers, European exporters and consumers of now-pricier French wine, Italian shoes, German cars and Canadian lumber, but experts say it is benign for the U.S. economic recovery.

"It's really taking a lot of pressure off manufacturing, which has been the hardest-hit sector of the economy," said Mark Zandi, chief economist at Economy.com. "They're making more profits, and ultimately that's what's needed to get businesses hiring again and growing."

Even during the boom of the late 1990s, a strong dollar squeezed exporters' profit margins, making their goods more expensive than those of foreign competitors.

"I certainly hope, selfishly, that we are in for a lengthy period of a relatively weak dollar," Robert Lutz, chairman of GM North America, said earlier this year. A strong dollar, he said, "may be good for the country in many, many, many ways, but I'll tell you, it's not good for industrial America."

In quarterly earnings results, multinational corporations have reported dramatic gains from the currency exchanges.

International sales at Wm. Wrigley Jr. Co. jumped 17 percent in the first quarter due mostly to positive currency comparisons, which helped to increase the chewing gum maker's sales by $40 million.

The sagging dollar meant the difference between a positive quarter and a negative one at Sara Lee Corp. The food and consumer goods giant reported 5 percent higher income and 4 percent more revenue for the first three months of 2003 than a year earlier; both would have been lower without the benefits of the battered buck.

Eastman Kodak Co., too, had a $12 million profit which would have been a loss without the effects of a lower dollar.

The story was similar at Altria, Bausch & Lomb, Baxter International, Caterpillar, Deere, Kellogg, Kimberly-Clark, McDonald's, Procter & Gamble, Weyerhaeuser and others.

On the flip side, the global economic slowdown limits demand for many products, inflation is a risk and the economy could be set back if the feebler dollar cools foreign investors' interest in U.S. stocks.

But at the moment, there may be no more concrete impact than the one felt by U.S. travelers to Europe.

Wiederhoft's latest business trip to Paris cost her nearly double what she paid on similar trips not long ago, she said, and forced her to compromise in her choices of lodging, dining and entertaining clients.

"I've gone from a four-star traveler and staying at places like the Hilton and Le Meridien, with every business comfort you can have, to three stars last year, and next I'm going down to two stars," she said. "This forces you to be a little more creative."