The U.S. Dollar just hit a 14-year high.
While the mainstream media thinks this is cause for alarm, the facts belie this convenient narrative. Here’s a story from the Wall Street Journal this morning:
“A strengthening dollar is re-emerging as a threat to U.S. manufacturers by making their exports more expensive and their foreign earnings less valuable. The U.S. currency, which has strongly appreciated over the past two years, surged to a 14-year high in the wake of Donald Trump’s election and the Federal Reserve’s decision to raise interest rates, adding a wrinkle to the president-elect’s pledge to boost factory employment.”
Hang on a sec. The manufacturing economy has been improving. Consider the facts:
- Small Business Confidence just hit the highest level since 2009 (along with other measures like Consumer and Homebuilder confidence).
- The most recent ISM Manufacturing reading hit 53.2, a respectable sequential uptick that’s been on the rise in the past few months
- Industrial Production data went from awful and recessionary to a continued trend that’s been less awful.
- U.S. GDP is accelerating, up +1.7% year-over-year in the third quarter versus five quarters of declines to 1.3% in the second quarter.
Furthermore, the manufacturing sector makes up just 12.5% of “value added” to U.S. economic growth (meaning the net output from the sector, subtracting for the inputs consumed in the production process). This number has been in steady decline for some time now (down from 17% in 1997). The manufacturing sector also employs around 10% of U.S. workers. In short, exporting is simply less important to the overall U.S. economy today.
Here’s Hedgeye CEO Keith McCullough in the video above:
“This concept that the strong dollar is a bad thing for the U.S. economy is only something that you could read in Old Wall media. It’s certainly not consistent with history and it’s certainly not consistent with a consumption-based economy.”
Don’t fall prey to the media’s fear-mongering. Trust facts.
