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| USA states nominal gdp (Photo credit: Wikipedia) |
The earnings reports so far have not been pretty, and the degree of ugliness seems to depend on how much exposure a company has to Europe and, to a lesser degree, China. Although I have mentioned a few times that SP revenues from non-U.S. countries probably average 20%-25%, even I was shocked by how dependent some companies had become on overseas revenues. 3M Co.(MMM) and DuPont(DD), two of this week’s bigger earnings disappointments, derive 66% and 61%, respectively, of their revenues outside the U.S.
Tech stock earnings have been hit hard as well. Even though tech firms are not as dependent as some on non-U.S. revenues, tech firms got most of their growth from emerging markets. In addition, European governments and their agencies have always been big buyers of tech gear. New product cycles from Apple (AAPL), Microsoft(MSFT), and IBM(IBM) certainly didn’t help matters either.
Meanwhile, GDP looked good to me despite some naysayers complaining about the large government contribution (some quirks in auto production results and farm inventories hurt GDP more than government helped–see below). Real estate data remained on a tear, and even manufacturing outside of Europe finally appears to be on the mend. And durable goods orders looked a little better for a change.
While the United States won’t remain immune to the rest of the world forever, and our fiscal situation remains in disarray, the U.S. continues to have some unique factors that will help the domestic economy if not its multinational corporations. Boeing’s(BA) ongoing ramp-up, a nicely improved and stable auto industry, and a lumbering housing industry that has finally stirred from the dead are several of the special features influencing the U.S. economy. A relatively stabilized banking industry sure isn’t hurting either. And then there is the ongoing oil and gas boom in this country.
GDP Grows Faster than Expectations
The broadest measure of economic activity, inflation-adjusted GDP, grew 2%, ahead of the second quarter’s 1.3% rate and last week’s consensus growth rate of just 1.6%, and in line with my most recent guess of 2.0%. The broad outlines of the report were as expected: a very strong consumer, an improved housing market, a business community stuck staring into the headlights, and a very modest detraction from net exports. Consumption improved by 2% on an annualized basis when compared with the second quarter. That represents an improvement from the 1.5% level in the second quarter, accounting for the bulk of the improvement in GDP compared with the second quarter. ... Read more.
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