The news about consumer prices continues to get worse for Americans.  Record wholesale and consumer prices were reported again earlier this week.  Gasoline surpassed a national retail price average of $3.40 per gallon today (April 17), and more price rises are expected.  Milk, cheese, eggs, and other basic grocery items continue to sell for high prices at the local grocery stores and supermarkets.  The weak dollar is still cited as a major culprit, along with inflationary conditions and lower interest rates.

The dollar actually remains steady against most major currencies except the Euro, which seems relentless in its push higher.  The dollar is about 5 pips above its recent low against the yen, as the dollar currently fetches 102.46 yen.  It is also about 8 pips off its low against the pound, as one pound is worth $1.989 at the moment.  The dollar is also holding firm above lows against the Swiss franc, and other major currencies.

Still, the dollar remains at historic low price points despite its month-length strength.  Its weakness has contributed to higher commodities imports, most notably oil, higher fuel prices, and higher consumer prices.  It has also made it much more expensive for American companies to acquire needed parts and products overseas.

The weak dollar has definitely not been all bad for business and investors, as of late.  While the weak dollar and the stock market are both impacted by economic conditions, stocks have been holding above 12,000 for some time.  In spite of ongoing negative news about credit and housing, and many bad earnings reports, strong earnings from big names have helped keep traders in the fight.

Google announced earnings after hours Thursday and surprised the market with an incredible 30% spike in first quarter earnings.  It easily topped analyst estimates for revenue and earnings per share.  Along with crediting business adjustments, the company also cited an increase in global demand for its revenue growth.  In fact, it said for the first time in 9 ½ years, global sales outpaced US sales.  They said the weak dollar had increased demand for the Internet search engine’s advertising opportunities.

St. Louis-based seed company Monsanto also had a strong earnings report recently.  It too cited global sales growth and the impact of stronger global interest in the ‘cheap’ US-based seed companies products.  The cheap price according to foreign buyers is due to the relative strength of their currencies to the dollar.

It is not just the foreign demand for cheaper US-based products that has led to some higher earnings and revenue reports for US companies.  Levi Strauss and Company credits its four percent revenue growth in its recent fiscal quarter to the weak dollar.  The company said the currency adjustment for the weaker dollar contributed to the entire four percent revenue gains, which directly impacted its bottom line of 12% earnings.  Obviously, from a practical standpoint, this doesn’t necessarily mean the company has improved its business practices, but four percent revenue looks better to investors.

Businesses that maintain a strong global presence have definitely been more self-sustaining during the tough times in the US economy.  As many companies report down earnings, companies that maintain a strong global revenue stream have been surviving, and thriving at times.  Even most companies that have been drawing more business from the weak dollar, however, would likely agree that it would be nice to see the US economy head north in the near future.  A rising dollar would likely tie to increased US consumer confidence, more domestic sales, and better margins through those global sales.

Market Recap

US equities surged Wednesday, with the Dow gaining more than 250 points on the day.  IBM’s strong earnings report from Tuesday evening helped drive Wednesday’s trade.  Thursday, it was Google’s turn to excite the market.  Equities were virtually flat during regular trade, with the Dow up 1 point and the NASDAQ and S&P down 8 and up 2, respectively.  After hours, though, Google surprised with a 30% spike in first quarter profits.  The company’s after hours share price soared $76, or 17%.  Earlier in the day, Merrill Lynch reported a first quarter loss.  Gas prices surpassed $3.40 on average and rises are expected.

Neil Kokemuller
Thursday, April 17, 2008
10:36 PM EST

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA.  He has a MBA from Iowa State University with a specialization in marketing.

Please note:  The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments.  Actions taken on the basis of the information shared is at the sole risk and discretion of the individual.  Currency investment poses significant risk of loss.