U.S. exports have been strong in recent months, which many believe has been partly due to a weakening dollar.
It’s well known that US exporters are helped by a falling dollar as their products become cheaper abroad.
Yet the dollar is even more helpful for one important segment of the U.S. economy – small businesses.
This is because smaller U.S. companies are far more likely to produce and source materials for their goods within the United States, in dollars. Thus when the dollar goes down it adds a huge boost to their price competitiveness vs. foreign companies. More so than for U.S. multinationals.
Portfolio.com: Large multinational companies tend to be less impacted by falling dollar prices because they manufacture at plants around the world and sell components to themselves on an intracompany basis, which tends to minimize currency fluctuations except in extreme cases.
Small companies tend not to have overseas production, so 90 to 100 per cent of their overseas sales are exports, Vargo says. “When we look at the data for smaller companies, you can see what I call a greater elasticity of response to dollar changes,” he says.