Some Businesses Benefit from Weak Dollar

First in a two-part series.

Graphic: The Dollar's Decline i i
Lindsay Mangum, NPR
Graphic: The Dollar's Decline
Lindsay Mangum, NPR

In Depth

Icon of a falling dollar
iStockphoto

How does the dollar's free fall on world currency markets affect you? Read a guide to whether a weak dollar is cause for celebration — or despair.

The dollar's fall against the euro and other foreign currencies has hurt American tourists overseas and boosted the cost of imported goods. But the weaker greenback may not be all bad for U.S. businesses and the economy.

"The weak dollar has had a significant impact on companies' raw material costs," Kate O'Sullivan, a senior writer at CFO Magazine, tells Renee Montagne. Companies buying those raw materials overseas are able to buy less with their dollars.

And companies that manufacture on foreign soil but sell their products in the United States have also been hurt by the sliding dollar.

But U.S. exporters are benefiting from the lower dollar. Compact Power, a South Carolina company that makes tractors and landscaping equipment, has doubled its foreign sales in the past year "because their products look cheap compared to local competitors," O'Sullivan says.

The weak dollar is also encouraging foreign manufacturers to set up factories in the U.S. European auto manufacturers are looking to increase their presence in the U.S., but foreign exchange isn't the only reason.

"It's part of a strategy to be closer to their [customers] as well," O'Sullivan says. "But with the weak dollar, it looks a lot more attractive to set up manufacturing here than it did, say, five years ago."

The dollar may also be having an impact on outsourcing. Because of India's strengthening currency and rising wages, some Indian companies are looking to hire workers for customer-service call centers in the U.S. because it's more cost-effective, O'Sullivan says.

Will all this end up helping the U.S. economy overcome its weakness?

"We're seeing corporate earnings boosted by this phenomenon, we're seeing exports boosted, possibly an employment boost if many [foreign] manufacturers do decide to expand here," O'Sullivan says. "So, in fact, the weaker dollar will help balance a little bit of the economic weakness that we're seeing. But I'm not sure it'll be enough. We'll have to wait and see."

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