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KSM Blog | Katz, Sapper & Miller CPA

The Rise of the Dollar: A Good Deal for Manufacturers?

Posted 7:35 PM by

The steady rise of the U.S. dollar has been the source of much conversation in the past few months. The reason for the increased value is twofold: domestic growth and an economic decline abroad.

Last year, the United States added three million new jobs, fuel prices declined sharply and the United States produced more oil within its borders than ever before. During that same period, Europe and Japan saw declines in currency values and slowed economic growth. The result, according to the Wall Street Journal, is that since mid-2014 the value of the dollar has increased 19% against the Euro and 17% against the Yen. Less drastic but equally notable is the Chinese yuan is currently at a 52-week low against the dollar.

As a result of these shifting tides, U.S. exports have become more expensive and U.S. imports have become less expensive, which has forced manufacturers to rethink their strategies. Exporters have had to consider how to enhance value and manufacture products in cheaper labor markets overseas. The big players in global manufacturing have been able to shift more production to existing foreign facilities already in place, while some mid-size companies have pursued joint ventures with other companies operating overseas.

Yet, some manufacturers have been largely unaffected, and, in some cases, have benefited from the dollar’s strength. Highly regulated markets like that of medical devices and airlines have seen less competition from cheap imports, as the quality certifications required have hindered foreign competition with the strengthened dollar. However, low-cost component imports have helped many U.S. manufacturers improve their margins.

The impact of the dollar’s fluctuation on U.S. manufacturing can be summarized in the old adage, “you win some, you lose some.” But make no mistake, the success of the manufacturing sector will rise and fall not with currency value, but rather with the ability to adapt to an ever-changing global environment.

About the Author
Jon Nix is a member of Katz, Sapper & Miller’s Audit and Assurance Services Department. Jon audits and reviews financial statements, and he advises clients on accounting, reporting, compliance and internal control matters. Connect with him on LinkedIn.

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