The Latest On The Global Economy
DAVID GREENE, HOST:
Exports of goods and services have been one of the bright spots in the lackluster U.S. economy lately. Exports have been growing much faster than almost anything else. But, economies around the world are now slowing.
And to find out what that means for U.S. exports and jobs, we turn, as we often do, to David Wessel, economics editor of The Wall Street Journal.
Good morning, David.
DAVID WESSEL: Good morning.
GREENE: Well, let's start with a few basics, if we can. How important are exports to the American economy these days?
WESSEL: Well, they're really very important. We have a $15 trillion economy now, and we export $2 trillion a year. That's twice the size of the American auto industry, and the whole game plan for the U.S. economy - if there is one - has been to increase exports while we spend a little more carefully at home to pay off all the debts we took on during the 2000s and recover from the housing mess. And this strategy has been working so far.
GREENE: That's a pretty stunning number. I just want to make sure I understand it, that the amount that we are exporting is doubled the size of everything that the American auto industry produces.
WESSEL: That's correct.
GREENE: Well, as we mentioned, growth is slowing in many parts of the world, and I guess I wonder what is the effect going to be on what has been an export boom for the moment.
WESSEL: It's not going to be good. Exports have done pretty well in the first half of 2012, but when your customers don't do so well they don't buy so much. The International Monetary recently updated its economic forecast, and it said that the global recovery - which was not strong to start with - has show signs of further weakness. And that's particularly true in Europe, of course, which buys about one of every five dollars of our exports. The U.K. and the continental recession, that's depressing demand around the world. It's bound to show up in our export numbers later this year. It's already causing big problems for the export powerhouses in Asia, like China and South Korea, because Europe is a really big customer for them.
GREENE: Well, you mentioned China and I mean, we've been hearing for some years now about the, you know, the growth miracle in China and also the rest of Asia. I mean, can they still pick up the slack or we're seeing some real problems there also?
WESSEL: Well, we are seeing some problems there. Part of the economic challenge we have right now is that almost every country in the world is trying to increase its exports at the same time. I mean, that's the only way out, people think. But someone has to be buying more if every country wants to be selling more. For a long time that was the U.S.; it isn't anymore. It would be nice if this was a moment where Chinese and Korean and Malaysian and Thai consumers picked up the slack, but there are signs that domestic demand in Asia is slowing as well. Couple big companies in the U.S. that make construction equipment - Caterpillar, Cummins and Deere - have in the last couple of weeks said that their hopes for selling a lot more stuff in China have been dashed and their sales are actually down. And one of my colleagues in Hong Kong, Alex Frangos, is reporting that you can see the Chinese cutting back on sales of clothes, that the lines at the Louis Vuitton stores in Hong Kong are less long even, and Chinese tourism and consumer spending, which has shown up at the baccarat tables at casinos in Macau and Singapore, is beginning to shrink. So they too seem to be pulling back.
GREENE: Hmm. It just - that sounds like the number of options for countries that can pick up the slack is just shrinking.
GREENE: Well, let's Europe for a moment. You said that Europe buys one out of every five dollars in U.S. exports, there's been a dark cloud there economically for some time. Any signs that that continent can get its act together soon?
WESSEL: Well, right now Europe is on vacation. They have it scheduled so you can't have crisis in August. They hope.
WESSEL: They hope.
But there is the outlines of a strategy. If Spain can get a loan from the rest of Europe and agree to some stiff conditions, then in a big change, the European Central Bank has said it's willing to step in and keep the economic engine going, much as the Federal Reserve has here. But there's a lot up in the air. There's constitutional decision coming in September in Germany. Greece is having trouble meeting the conditions that the rest of Europe set for it and there's renewed talk that they'll have to leave the euro. Tensions among the 17 countries that share the currency remain, and there's this ever-present risk that there's some miscalculation and accident, and we have a really big financial crisis.
GREENE: Well, let's come back home before we leave you and talk about the United States. We said the export's one bright spot in the tough economy. Are there any other bright spots that you're starting to see elsewhere?
WESSEL: Yeah. Actually, the incoming data has been for a change on the encouraging side. Let's be clear, the economy is still growing very slowly, probably too slowly to bring employment down much for the rest of this year, but the July numbers are looking reasonably good. Retail sales were surprisingly good. People seem to be shopping again. And we see from the recent data that businesses have accumulated fewer goods in their inventories, and that's sometimes seen as a harbinger of increased production and more jobs ahead.
GREENE: All right. David Wessel, always good to talk to you. Thanks.
WESSEL: You're welcome.
GREENE: He's economics editor of The Wall Street Journal. Transcript provided by NPR, Copyright National Public Radio.