Idaho’s import and export of goods and services with foreign partners provides tremendous economic benefit.
Since international trade often relies heavily on state leaders’ ability to establish business connections and make it easy for foreign companies to do business in their state, Idaho’s government institutions have developed public and private partnerships to boost international trade. Government entities provide Idaho businesses with the diplomatic leverage necessary to identify opportunities and establish trade relationships with foreign partners.
The Idaho Department of Commerce runs trade shows to highlight Idaho companies and explain the steps they must take to attract foreign partners. The department also promotes global trade through one-on-one consultations and foreign trade missions.
Companies that participate in trade missions receive market briefings on the country they are visiting, individualized itineraries for each business or organization that is visited, and outstanding networking opportunities. Past trade missions have been successful in helping companies increase sales and other opportunities. Governor Otter’s next upcoming trade mission will visit China at the end of October.
U.S. Economic Outlook
Short-Term Outlook. Although experts don’t know how Brexit will affect the U.S. and world economies long term, the events of the past few weeks have demonstrated short-term market uncertainty and volatility. Right after the results were announced, stock markets dropped but then mostly stabilized several days later despite continued uncertainty. The market is likely to remain volatile until the United Kingdom and European Union develop a clear path for officially implementing Brexit.
The upward revision of first-quarter GDP growth for 2016 indicates that the U.S. economy did better than previously expected, although not as well as economists had hoped. The previous estimate showed GDP growth at a mere 0.8-percent pace. The upward revision was driven primarily by higher-than-expected exported goods and services, company spending on software, and research and development. Other aspects of GDP remained consistent with the previous estimate.
Consumer spending is a major contributor to GDP. Preliminary numbers from the second quarter show consumer spending holding steady, although economists had projected a higher rate in correlation with lower gasoline prices. Americans are buying cars at solid rates, and home sales reached a nine-year high in May. Real disposable income and overall household wealth have both increased, reinforcing consumer spending in recent months.
While the Federal Reserve may raise interest rates again this year, uncertainty about Brexit may delay this action until autumn. In order to raise interest rates, the Federal Reserve is awaiting confirmation of steady economic growth, sufficient job gains, and movement toward 2-percent inflation. At this point, inflation has stayed below 2 percent for a significant amount of time, and job gains are slowing. Although markets do not expect an interest rate hike soon, the Fed could potentially implement one in September if economic data turns more positive.
While the unemployment rate has steadily declined since the height of the recession, so has labor force participation. Although declining participation reflects both an aging population and an increased percentage of young people in school, it also indicates that many Americans may have just given up searching. Over the past several years, jobs have increased in healthcare, technology, and business services, but jobs in manufacturing have decreased. The changing makeup of the labor market economy favors highly-skilled labor over manual labor, widening the gap between upper-class and middle- to lower-class Americans.
Even before the Brexit vote, the International Monetary Fund (IMF) had revised its forecast for the U.S. economy this year to 2.2-percent growth—down from 2.4-percent growth in 2015 and down from April’s 2.4-percent 2016 growth forecast. Despite lowered expectations, the IMF believes the U.S. economy is in good shape. Goldman Sachs, Barclays, and Bank of America also lowered their forecasts following the Brexit vote, noting that stock market volatility and rising dollar value both hurt the U.S. economy in the long run. Forecast reductions have been minor, however, and they adjust for the volatility that will affect most economies throughout the world.