Economic Outlook n° 1187 | Special Report | The Reindustrialization of the United States
Euler Hermes
ming about 14% of all U.S. exports. Unlike much of the world since the recession ended in 2009 Mexico has en- joyed steady and strong growth, with robust annual GDP growth of 4.6% versus a long-term average of 2.7%, clearly boding well for future U.S. exports. Central and South America absorb 11% of U.S. exports, and pros- pects for continued strength in these emerging eco- nomies are good. China absorbs 7% of U.S. exports, and the long-term growth of the Chinese economy is ex- pected to remain very strong, despite a recent soft patch. Asia (ex-China and ex-Japan) consumes 13% of exports and like Latin America, growth in these emerging eco- nomies is likely to be robust. Together these major, strong markets buy 64% of U.S. exports. Europe is of course a weak spot and may be for some time, but ex- ports to the European Monetary Union comprise only 13% of total U.S. exports. Furthermore, the Fed’s quantitative easing policies have devalued the dollar, making export prices cheaper and boosting their competitiveness. Between the end of 2009 and August 2012, exports from the U.S. have risen 45%, a 15% an- nualized rate compared to the long-term average of 7.8%.▣
4. Bankruptcies in millions 30000 Bankruptcies 25000 20000 15000 10000 5000 0 Sources: Administrative Office of the U.S. Court, Euler Hermes
5. Insolvencies to decrease in the manufacturing sector annual change, in %
Looking at 2013, expectations are that the downward trend in insolvencies will continue. We expect the decrease in insolvencies to be 10% in 2012 and 6% in 2013. This will happen for two reasons: first, GDP growth in 2013 is forecast to be around 2%. This should suffice to help decrease the number of insol- vencies in the economy. Secondly, businesses are still operating in the risk-averse manner which helped them survive the recession. They are carrying lower debt levels on their balance sheets, providing them more of a cushion should there be another down- turn. And they still running in a very lean mode by keeping operational costs and payrolls as tight as pos- sible. > Manufacturing tends to be more sensitive to the business cycle as Figure 5 below clearly shows, and as such tends to be riskier as well. Manufacturing insolvencies rose more sharply than the total eco- nomy in the recession and fell more sharply in the recovery, and were higher than the total throughout virtually all of this time period. However, it is impor- tant to note that after the recent recession, manu- facturing insolvencies closed the gap with the total economy because of the sector’s outperformance. The services sector is less sensitive to the business cycle, as demonstrated by how much less insolven- cies fluctuated. Since it is less risky it also has an insol- vency rate lower than the total economy.▣
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Another positive sign for the industrial fabric: insolvencies on the decrease
> As shown in Figures4and5, business insolvencies have overall been on a slightly downward trend over the past decade. Insolvencies rose as the economy deteriorated through 2007, and increased further in 2008. Insolvencies often are a leading indicator, as they were when they fell sharply in 2009 as the reces- sion came to an end. By that time, most of the vul- nerable businesses had already failed, and those that survived had done so by: > reducing debt on their balance sheets, > becoming more risk-averse by not extending as much risky credit to other businesses, and > by reducing headcount. These factors allowed businesses to survive even though they put a weight on the economy which has yet to be fully removed.