Wells Fargo: U.S. Companies Anticipate Export Decrease In 2015
Amid concerns of weak global economic conditions, U.S. companies anticipate a decrease in the volume of exports and profits stemming from international business this year, according to the latest Wells Fargo International Business Indicator.
Thirty-nine percent of the U.S. companies surveyed expect to see an increase in profits from their international business in 2015, down from 51 percent in 2014. But at the same time, only 30 percent expect to see exports increase this year, compared to 50 percent in 2014.
“Continued concern about global economic conditions, slowing growth in China, the value of the U.S. dollar and its effect on exports, are impacting short-term international business activity,” says Sanjiv Sanghvi, head of Wells Fargo Global Banking in New York. “The latest Indicator results reflect what we’re seeing in the marketplace and hearing from our customers.”
Only 37 percent of the American companies surveyed said they see the global business climate improving this year. As a result, only 54 percent of the firms surveyed said they plan to increase activity in 2015, a decline from 69 percent in 2014.
According to the Indicator, U.S. businesses expect international business factors, including excessive and arbitrary regulations at home and abroad, political instability abroad, and excessive fluctuations in currency and exchange rates to have a negative impact on their businesses in 2015. When assessing new international markets to enter, U.S. companies are most concerned with political stability, infrastructure, trade regulations, the ability to enforce contracts, the “ease of trading,” and the availability of skilled labor (79 percent).
But while the near-term outlook has softened, Sanghvi adds that U.S. companies “value international markets for business development and we expect to continue to see them investing in the global marketplace as they plan for long-term growth.”
Despite dampened short-term expectations, the report states “a majority of companies remain bullish on future international business, with 80 percent agreeing that U.S. companies should consider expanding internationally for long-term growth.”
U.S. companies remain confident about the future of the global marketplace. A majority of the companies surveyed expect to increase international business-development planning in 2015. Additionally, nearly half believe business outside the U.S. will be increasingly important to their overall financial success in the coming year.
According to the Indicator, American companies consider Canada and China as the most important countries today for international business, followed closely by Mexico and Western Europe. Looking out two to three years, they see China and Mexico as the top two “hot-spots” for their future growth, with Brazil and India (each 13 percent) also showing promise, the report concludes.