Posted by: Howard Silverblatt on July 30, 2008
Five years ago U.S. equity markets were 57.6% of world markets, today they are 40.5%. Five years ago, the U.S. GDP comprised 29.6% of the world GWP, today it is 21.2%. While the U.S. equity market and consumer remain the largest and dominant component of their respective groups, they are no longer the overpowering element. Where the U.S. used to catch a cold and the rest of the world got pneumonia, now the rest of the world gets the flu. The destination and manufacturing of U.S. products and services have equally changed. Helped along by lower costs for labor, healthcare, pension (and OPEB), and assisted at times by tax laws and product regulations, U.S. companies have moved their operations abroad where products can be more cost efficient to both manufacture and sell.
I have just released my S&P 500 Global Sales 2007 report that quantifies the current status of known foreign sales within the S&P 500. While globalization is apparent in almost all company reports, exact sales and export levels are difficult to obtain. Many companies tend to categorize sales by regions or markets, while others segregate government sales. Additionally, intra-company sales, (and hence profits) are sometimes structured to take advantage of trade, tax and regulatory polices. The resulting reported data available for shareholders is therefore significantly less than the desired level for analysis. Still, with utilization of over slightly half the issues in the S&P 500, it does permit a rare glimpse into its composition. What are needed are actually defined reporting classifications and values in a tabular form, similar in nature to the many GAAP-required items. Additional reporting on country of manufacturing, country of sale, and insight via a matrix of how a change in currency would impact costs (both hedged and unhedged) would be ideal, but at this point there appears little hope for that on the near-term horizon.
There can be little doubt that the growing shift of U.S. economic power and influence will continue to have a negative impact on our society. However change, and the hardships that it brings are not new, and this country has a long track record of meeting and conquering its challenges. Unfortunately that history also shows we are sometimes slow to react. Eventually we will, and eventually, the power shift will stop and reverse itself. Our government does react to the ‘will of the people’, but mostly it is to the short-term will. We, as the people, need to make it clear what our objectives are, as well as our time horizon and expectations.
The bullet points of the report are below, for the full report tab here
S&P 500 foreign sales increased 12.5% while domestic sales increased 2.6%.
Foreign income taxes increased US$ 10.9 billion or 9.7%; U.S. federal income taxes declined US$ 4.2 billion or 2.7%
European sales represented 28.8% of foreign sales, with 4.6% coming from the United Kingdom. Asian sales represented 16.8%.
Higher growth for Emerging markets, the decline in the dollar and concern over U.S. consumer spending are fueling the continuing shift to sales abroad.
Half of the issues still do not report sufficient information for a complete breakdown – big on pictures, short on tabular tables.
Of the reporting issues, 45.8% of all sales were produced and sold outside of the United States, up from 43.6% in 2006.