Posted on 11/07/2007 4:59:07 PM PST by Dane
Euro Surge Hurting German Exports
© 2007 The Associated Press
FRANKFURT — The surging value of the euro is causing German exporters to lose orders to U.S. and Japanese competitors, industrial groups said Wednesday.
"We've long surpassed the pain threshold," Olaf Wortmann, an economist at the German Engineering Federation VDMA, told Dow Jones Newswires, after the euro hit a new all-time high of $1.4737 Wednesday.
The strong euro undermines the competitiveness of euro zone exporters, as it makes their products more expensive outside the currency area.
"It's getting difficult for export-oriented businesses," Thomas Huene at BDI Federation of German Industries said.
Germany's big chemical industry expressed similar concerns.
"Chemical products from Germany get more expensive vis-a-vis the competition from overseas," chemical industry association VCI said in a statement.
According to the VCI, German chemical exports to the U.S. have dropped 5.6 percent since the beginning of 2007. Chemical exports to Japan fell 2.5 percent over the same period, while global German exports have increased about 10 percent since January.
A stronger euro has also started to hamper German exports to other euro-zone nations, as clients chose to purchase supplies from outside the area, VDMA's Wortmann said.
But the high degree of specialization of German machines, tools and equipment has helped cushion the effects of a stronger euro, industry groups said. A stronger euro has also lowered the price of some imported goods, especially crude oil and other dollar-denominated commodities.
A strong euro/weak dollar seems to be a two edged sword.
BTW, why are the buchanan pitchforkers all in a tizzy, a weak dollar is a tariff on foreign goods, exactly what they have been screaming for.
The Germans have plenty of Mexican investments. What are they unhappy about again ?
Europe ping
Currency exchange rate is a measure of relative strength. I wouldn’t call it a two-edged sword, really - it is what it is - the free market determines the value of the currencies one vs the other. For what it is worth, I believe that the USD is heavily undervalued, or, EUR overvalued.
CNBC ran an interesting segment they called the ‘iPod’ index, i.e., what is a price of an iPod in USD in various places in the world. There is absolutely no reason what so ever, that an iPod should cost $99 in the US, and $150+ or so in Europe. It is a commodity gadget, extremely widely available. So why the surcharge ? That, to me, represents a system out of balance that will correct itself - either EUR will go down, or the USD will strenghten.
But none of it is of much concern, unless you’re thinking about going to vacation to Paris.
Except for the price of foreign oil - and that is another story - surging foreign currencies means products from those countries will be more expensive in the US and US products will be cheaper in those countries - unless those governments raise tarriffs to protect their products.
The US consumer hardly notices monetary exchange rates unless he buys foreign goods. In addition, travel abroad may be more expensive.
The biggest danger is that foreign countries which hold US dollars may start dumping those dollars for more attractive, valuable currencies. However, with the US government one of the most stable in the world and the strength of the US economy, vast dumping of US dollars is doubtful.
The worst thing about a weak dollar is that the price of oil goes up.
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My guess is that the oil price is being driven by speculators who're buying it up. At some point, they'll have to release that oil back onto the market, which will cause its price to plummet. Similar to the "housing bubble" of a couple of years ago.
And that is what I been waiting for, the dropping of the other shoe.
What do they export besides Beemers and military style walks?
Not to jack the thread, but that's scary right there. Everyone knows German stuff is expensive, but often it's the sole source of the level of quality needed.
(If only they had a series frozen pizza industry :^(
Your typical equiped BMW 3 series will now run you over 50,000 at sign on the papers time.
Its a fine car, but man o man, for a entry level BMW, thats getting insane.
So yoiu are saying America can't make a similar product.
You buchananites are amazing with your constant gloom and doom.
You all are constant cranks.
Ah those poor wittle yuppies are hurting because beemers are going up in price.
Several reasons that I can think of:
1. US housing would only look cheap to foreigners. Many Europeans bought property in Florida, for example, they are looking at a decline in value plus a decline relative to their home currency. Unlikely they will be re-investing soon.
2. Unfortunately, no one can predict accurately when the housing crisis ends and the trend is still downward, thus investors naturally don’t want to “catch a falling knife”. Those that will buy will wait for signals such as declining housing inventory.
3. If you are an American investor and the cost of gasoline and the cheap junk we buy from overseas has gone up, then you have less to spend on housing.
On the bright side, there will be a bottom and betting long-term on the US economy is still a good investment.
They’re are some benefits to a weaker dollar v.s. euro. It means the european companies will be moving more manufacturing/jobs to the US.
BMW already builds the X5 SUV in Spartanburg, SC and word is they will be moving X3 production from Graz, Austria to the Spartanburg factory by 2009 due to euro/dollar issues.
I'm not saying it, the free market does. Germany works in a high cost environment, taxes, six week paid vacations, huge GREENIE influence, the whole ball of wax.
Yet, they still are considered the 'go see guys' for certain chemicals & processes. There simply is no other source (for many of their products), hence the free market allows them to operate with their cost structure.
Nobody buys their output for prestige, it's the only game in town for some things.
And what's with this Buchannon stuff? I've never voted for him and I don't particularly care for his Mercedes driving self.
There is no oil shortage to boot. These speculators can be brought to their knees fast. The SEC can say anyone that buys oil contracts going forward WILL TAKE and OWN DELIVERY. That’s all. You can’t easily fit a ship into some cubicle and the price drops to normal.
SSSSSSHHHHHHHHHHH!
(this is the reason why the dollar is sliding....it’s a dirty little secret....conservatives decry Bush for selling out the dollar....He’s not! He’s selling American goods, and lots of them!)
Maybe what is going on will force China to float it’s own currency?
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