U.S. companies offset losses overseas

Jeremy Hobson Jul 23, 2008

U.S. companies offset losses overseas

Jeremy Hobson Jul 23, 2008


Kai Ryssdal: The Fed said today price were up and consumer spending was down almost everywhere. Real estate was weak and wages were flat.

But it’s that bit about consumer spending’s the big one because if we’re not buying, who are companies supposed sell to to get the economy going again?

Some earnings announcements this morning gave us some idea. From Washington, Jeremy Hobson has the story.

Jeremy Hobson: McDonalds reported net income of $1.2 billion in the second quarter. On the shareholder conference call this afternoon, COO Ralph Alvarez wasted little time talking about U.S. sales even though they were up. It was all about growth in Europe, the Middle East and Asia.

Ralph Alvarez: In Japan, the addition of several new items to the 100 yen menu including premium roast coffee and desserts is resonating with our customers.

It was the same story with earnings today from Pepsi, Whirlpool and drug-maker GlaxoSmithKline. Here’s CEO Andrew Witty talking about the quarter’s results for a popular asthma drug.

Andrew Witty: Europe continues to perform extremely well. We see our emerging markets and the launch in Japan going well.

As for the U.S.? It’s, uh, it’s okay.

Larry Horwitz is a senior economist at Decision Economics. He says relative strength in foreign markets is allowing many U.S. companies to offset losses here at home. Then there’s the weak dollar which makes U.S. goods cheaper abroad.

Larry Horwitz: My estimate is for many of these companies about half to two thirds of the gains they’re getting are currency-driven gains as opposed to volume, but that still leaves good volume gains.

Horwitz says some industries like homebuilding and telecommunications will have a harder time shifting business abroad, but for other sectors like heavy equipment and computers, there’s already a huge push underway to market internationally and build infrastructure outside the U.S.

As Horwitz puts it, that’s where the growth is.

In Washington, I’m Jeremy Hobson for Marketplace.

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