| BUSINESSWEEK ONLINE : AUGUST 16, 1999 ISSUE | ||||||||
| ||||||||
 | ||||||||
| CORPORATE SCOREBOARD
Overseas Economies Aren't Chipping in Yet Stock prices may be soaring in Asia as the local economies start to grow again, but don't look for much of a payoff in Seattle or Atlanta. In fact, little of the rebound in overseas economies has filtered through to U.S. corporate bottom lines yet--and economists worry that weak recoveries abroad may peter out before they have much impact at home. Certainly, things are better than last fall, at the height of the financial crisis that rocked Asia and Latin America. Earnings from U.S. overseas operations rose 10.5% in the first quarter, according to the Commerce Dept. Even better, U.S. exports grew at a 3.7% rate in the second quarter. Although that's still well below the double-digit export growth experienced at the tail end of the boom, it's far better than the negative territory that was seen at the end of 1998. David Wyss, chief economist at Standard & Poor's DRI, expects 5% growth in the third quarter and 2% in the fourth, as Boeing Co.'s airplane shipments fall off. ''It's going to take several years before we see the [overseas] earnings growth we saw prior to the crisis,'' says James Glassman, a senior economist at Chase Securities Inc. If the worst is over for Southeast Asian economies, however, it will be difficult for them to stage a sustained rally until Japan, their biggest trading partner, turns around. Signs of life in the Japanese economy reflect a huge injection of government spending. The money tends to get funneled into public infrastructure projects, such as bridges and roads. That spending has yet to spark a commensurate increase in either consumer demand or private capital investment--the kind of boom that results in sales of more Boeing airliners or cases of Coke. ''It's a temporary shot in the arm,'' says Sung Won Sohn, chief economist at Wells Fargo & Co. Meanwhile, south-of-the-border economies, such as Brazil's and Argentina's, remain mired in recession despite some early signs of improvement. Things would be even worse if it weren't for free-spending U.S. consumers. The U.S. racked up a record $21.3 billion trade deficit in May as imports of foreign goods and services grew 2%, while exports shrank 1%. Says Glassman at Chase: ''We've been importing them out of their recessions. So far, it hasn't helped U.S. exporters much.'' Indeed, even as some sectors are starting to get a bit of a lift abroad, the overall picture is mixed. Technology seems to be bouncing back the fastest. IBM reported a healthy 19% boost in Asian sales of computer hardware, software, and services, which helped it record an overall 65% earnings increase over the year-earlier period. But consumer-goods companies are still struggling. Coca-Cola Co. said weak sales in Asia, Latin America, and Europe contributed to a 2% decrease in both global case sales and syrup shipments. PARKED. Heavy agriculture and mining machinery is even tougher to sell than soft drinks. Caterpillar Inc. reported that sales of its giant trucks, loaders, and other machinery fell 34% in Latin America in the last quarter. ''Demand remains weak in several key geographic regions,'' says Caterpillar Chief Executive Glen A. Barton. The upside, of course, is that many companies are posting gains without much contribution from overseas. So when a real turnaround emerges in Asia or Latin America, the effect could be breathtaking. For now, though, U.S. companies know their earnings growth will have to be mostly home-grown. By Andrew Osterland in Chicago _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
|  |
 | |
RELATED ITEMS Big Spenders Are Keeping This Party Going CHART: A Spotlight on Second-Quarter Profits TABLE: Winners and Losers in Quarterly Profits Overseas Economies Aren't Chipping in Yet CHART: Just Starting to Pick Up Steam TABLE: The Second Quarter Corporate Scoreboard (.pdf) INTERACT E-Mail to Business Week Online | |||
