But after years when American consumers have pulled the global economy forward, today the roles are largely reversed. A growing global economy is providing the best source of momentum America has right now, as the nation's consumers struggle to cope with high oil prices and a downturn in the housing market.
How big is the momentum? Enough to offset much of housing's negative impact. Over the year that ended on Sept. 30, a rise in US exports has equaled the decline in residential construction that represents the biggest portion of housing's current drag on growth.
"One of the reasons that the US economy has avoided a recession so far, despite a ... prolonged downturn in the housing industry, is because of the stimulus that the US has received from the global boom," says Ed Yardeni, an economist at Yardeni Research Inc. in Great Neck, N.Y. "It's been a big benefit, and I think it will continue be so."
Global growth benefits the US through several channels:
•The most obvious is that exports have been rising, now running at an annualized pace of $1.7 trillion, up from $1.5 trillion a year ago.
•America's largest companies also gain profits from sales of goods and services by their foreign-based operations. The employees are overseas, but the resulting profits provide a cushion for these companies during a US slowdown. Just ask General Motors Corp.
•The US enjoys access to foreign sources of capital that are more abundant than ever. This includes a continuing flow of investment funds – despite the drawbacks of a weaker dollar and the mortgage woes of US banks. It also means direct investment by foreign firms in US operations.
This is the chief benefit of the falling dollar -- increased exports. However, I would add the following cautionary notes.
1.) Overall profit growth for S&P 500 companies was negative last quarter, indicating that growth in foreign sales was not enough to mitigate the impact of a slumping US economy.
2.) The dollar's position has been increasing the calls from around the world for moving away from the dollar. While a cheap dollar is good, a dollar that people are dumping as a reserve currency is bad.
3.) Exports accounted for about 13% of total US GDP (approximately). In other words, there are still other areas of the economy (like consumer spending) that are larger and far more important for their overall impact.
Still, it's good to see exports increasing. And it's really nice to report something positive.
