If there's any doubt that the U.S. economy is becoming more and more tied to the global economy, consider the following: Exports and imports of goods and services in the second quarter were equal to a record 28.4% of gross domestic product, up from 25.5% in 1996 and less than 21% five years ago.
But the real surprise in America's expanding trade sector in recent quarters has been the outstanding performance of U.S. exports. Economist Stephen S. Roach of Morgan Stanley, Dean Witter, Discover & Co. points out that fully 42% of the economy's 4.3% growth rate since last fall was thanks to a 24% surge in goods exports.
By way of comparison, Roach notes that the enormous consumer sector, which represents 68% of the economy, accounted for 51% of growth during the same period--only a bit more than the merchandise export sector that is less than one-seventh its size.
The secret of America's newfound trade prowess lies in its strong competitive edge in capital equipment, especially high-tech items. Some 78% of the recent increase in real merchandise exports reflects rising sales of capital goods, mainly computers, chips, and peripherals but also industrial and construction machinery and civilian aircraft.
With Europe's economies finally perking up and growth in Canada and Latin America accelerating, the outlook for continued export gains would appear to be good. The only cloud on the horizon seems to be the risk of widening turmoil in Southeast Asia. But the principal countries affected so far account for less than 10% of U.S. exports, and most observers don't see a big threat developing yet. Thus, if Asian problems don't spread and Europe's prospects continue to improve, U.S. capital-goods exports should strengthen even more.
"As country after country rushes to squeeze operating expenses by substituting capital for labor," says Roach, "America's competitive leadership in the global technology business promises to power the U.S. economy forward well into 1998."