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Sep 23
2010

Exports are the key to healthy growth

Posted by annearf in SpendingexportsconsumersCareers/Management

annearf

Increasingly our economy is becoming bifurcated. And the essential dividing line is between companies that are exporting to faster-growing countries and those that aren't.

Specifically, large companies that derive a significant portion of revenues from exports are growing pretty nicely. On the other hand, corporations with a smaller level of sales from international business are not faring as well.  The 10 companies in the Dow Jones Industrial Average with the most revenues from international sales will grow an average of 8.3 percent over the next year, according to the Wall Street Journal. The 10 with the smallest portion of revenues from exports will grow 1.6 percent.

The reason, of course, is that the economies of countries like China and Brazil are growing considerably faster than the US, where consumers are still tamping down their spending. As a result, corporations like Exxon Mobil and Coca-Cola, with more than 50 percent of revenues from exports, are doing better than such firms as Home Depot or Travelers, with less than 15 percent of sales from overseas.

At the same time, exports also are creating a significant gap in growth rates among large and small companies.  (Better access to credit is another factor, of course). Because small companies generally do little business abroad, they're stuck selling to slow-growth domestic markets. And that's hurting their ability to bounce back and to hire.

It's unclear what all this means for overall growth. For example, there's a good chance we'll see a trickle-down effect, by which the success of large exporters will benefit small companies that supply them. And it certainly seems that all this export activity is vital to any semblance of economic recovery in this country.

The moral for companies not doing significant exporting is to step it up. That's where growth lies. 

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