from the Kansas Fed
— this post authored by Nicholas Sly
Exports of goods and services account for a substantial share of total U.S. economic activity, with a total value upward of 13 percent of GDP since the year 2000. With so much production, investment, and employment concentrated in the export sector, changes in foreign demand for U.S. goods have important implications for domestic growth.
For example, in the early years of the current recovery, exports were a key driver of economic growth; in recent years, however, declining net exports have been a drag on economic growth. Recognizing the importance of the export sector to the U.S. economy, policymakers pay close attention to global factors that influence the demand for goods produced domestically.
In recent years, key factors such as foreign income levels and the value of the dollar have changed dramatically with clear consequences for the demand for U.S. goods. Another, less obvious factor that influences demand for U.S. exports is uncertainty about global growth and related financial volatility. In 2015, economic growth slowed in several emerging markets, with spillovers to their trading partners that are difficult to forecast. The fog does not seem to have cleared much in the beginning of 2016. Movement in oil prices, volatility in equity and bond markets, and changes in monetary policy environments across countries have all contributed to uncertainty about future economic growth. Regardless of the total size or income of foreign economies, greater uncertainty about their expected growth path may deter resident consumers and firms from ordering goods and components produced in the United States. Likewise, greater certainty about future economic conditions may boost demand for U.S. goods even if foreign incomes and exchange rate levels remain unchanged.
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Source: https://www.kansascityfed.org/~/ media/ files/ publicat/ econrev/ econrevarchive/ 2016/ 2q16sly.pdf
