2018: Promising year for exporters

Just last week, US President Donald Trump was in his usual self again. To recall, he made that bold decision to recognize Jerusalem as Israel’s capital. A move that was totally disagreed by the other members of the UN Security Council and shaken the region and the entire Muslim world. As a result, rockets flew from both sides (Israelis and the Hamas).

We know for a fact that the USA’s influence is so huge. Had it just been the Philippines recognizing Jerusalem as Israel’s capital, it won’t have triggered anything at all. However, it was US President Trump. Consequently, due to his bravado, the world in general, and the Middle East in particular, raised concerns on its repercussions.

Indeed, the USA is so influential. In fact, so influential economy-wise. Undeniably, it has so much influence too to our own economy. Why? Because it is a major market of our locally-produced products and services.

For one, you may ask any Cebu-based economists and they will tell you, in unison, thatour local economy is driven by tourism, business process outsourcing (BPO) and export.  If you’re keen enough, you will notice that these are foreign-money driven.  Tourism largely depends on foreign tourists’ spending (and there are a good number of American tourists here).  Obviously, BPOs and exports cater to foreign companies’ needs (notably, a sizeable volume of these products and servicesare US-bound).

After almost a decade of plummeting, the USA willfurther roll this year.  Just last quarter, USA’s economy grew by over 3 percent.  Moreover, joblessness is easing up as their job growth has constantly increase.

World economists may have differed in its forecasts but all of these are pointing to upward trajectories.  Moving forward, these economists are looking at growth rates at between 2.5 percent and 3 percent or even more.  This development is so encouraging. It is a known fact that the US Gross Domestic Product is 70 percent consumer spending driven.  Therefore, should consumers curtail spending, the US economy contracts.  In simple terms, if Americans stop buying, the world loses the money of the widely known habitual big spenders.  On the contrary, however, the world shall benefit.

The question now is, do they have bigger income that they can spend?  The gross income may not matter much but in terms of bottom line, yes, definitely. Where will that increase in bottom line come from?  From cheaper oil. First and foremost, statistics shows that 88% of the US workforce travels by car. Therefore, this 88% of the workforce shall enjoy a big cut in their fuel spending as global prices remain low. These savings will surely translate to purchases of other durable (like houses, furniture, etc.) goods or consumable (like dried mangoes, bananas, etc.) items.

The base is also expected to expand on account of rising employment rate as some previously closed manufacturing plants are to resume operation and the existing ones are to increase production.  A normal reaction when there is increased consumer spending and cheaper fuel prices. In fact, just last month, the US economy added 228,000 new jobs.

Moreover, the US “housing starts” and “new home sales” figures this year is, at the very least, steady.  As we track and analyze the rise and fall of “housing starts” as well as “new home sales” in the USA, we must be aware that there are many industries whose fates are tied to residential construction. Apart from the easily identifiable construction materials like lumber, cement, roofing materials, etc., the furniture industry is among those directly affected by its movements.

For us, Cebuanos, “housing starts” statistics are very relevant.  Rightly so, because there is one industry in Cebu that will be directly benefited by its rise and will be badly hit by its fall, the furniture industry.    Thus, any drop in the “housing starts” statistics coupled with an unequivocal dependence in the US market could mean disaster for Cebu’s furniture industry.  Any rise, however, could mean bounty for industry players and their dependents.

Coupled with the construction boom in Cebu, indeed, these are bits of good news. For our furniture manufacturers’ and other exporters’ sake, hopefully, the USA and Cebu (local construction boom) can sustain it.