Monday, April 20, 2015

Strong dollar hurts the exports of US technology – German Economic News

The US companies suffered revenue losses due to the strong dollar in the first quarter. In particular, the technology sector is concerned, since this is highly dependent on foreign markets. The strong dollar also slows down the US labor market.

The euro last year against the dollar, massively lost value. (Graphic: Ariva)

The strong dollar is to stress test for many US corporations. These include IBM, General Motors, United Technologies, Coca-Cola and McDonald’s. General Electric (GE) and Philip Morris reported last week that the strong dollar has reduced its revenue in the first quarter of each almost a billion dollars.

But most of all technology companies like Apple are negatively affected because these generate the majority of their income abroad. Technology companies are the strength of the dollar acutely exposed as the sector more revenue generated abroad than any other sector, reports the Financial Times. US exporters are also unhappy with the dollar appreciation. It causes that their export goods are more expensive, so that companies will lose more competitive internationally.

The US labor market is suffering from the dollar development. The US corporations are holding back with the hiring of new workers – in March, many jobs were created only half, than was previously expected. “No question, the economy suffers from the adverse effects of the strong dollar (…) Corporate profits are under pressure, the lower hires are a reaction to it,” Bloomberg quoted the analyst Jim Baird from the financial services firm Plante Moran Financial Advisors.

Larry Fink, CEO of the world’s biggest asset manager BlackRock, warned last week against a loss of confidence in the dollar. “While the US economy as a whole is not overly reliant on exports, there are, however, many of our largest and most influential companies,” said Fink.


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