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By New_Deal_democrat December 21, 2015 10:07 am
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The big story of 2015: the US$
Without doubt, the biggest economic story of 2015 has been the effect of the strong US$.
 
In my 2015 outlook from one year ago, I posted the chart of the Index of Leading Indicators through November 2014: 
 
 
This showed strong positivity, and gave every reason to believe that 2015 would feature about as much growth as 2014.  Through the 3rd Quarter that hasn't happened, although the expansion has certainly continued.
 
The Leading Index does a good job of capturing *domestic* US factors affecting growth -- but in an era of exports as an increasing share of US GDP, as shown in the graph below:
 
 
the strength or weakness of the US$ plays an enhanced role.  Note how in the graph above exports and the US$ have a generally inverse relationship.
 
The effect of the US$ is not well captured in the LEI, and it is clear that the strength of the US$ has had a profound effect on the economy in the past 12 months.
 
Here is a graph of the US$ (blue) vs. Industrial Production (red) through November of this year.  Industrial production peaked in December of last year, 5 months after the US$ began to surge.
 
 
By March of this year, the downturn had spread to US trucking:
 
 
and to US rail:
 
 
UPDATE:  And here is steel:
 
 
Note that after the US$ strengthened yet more beginning in late summer, all 3 - industrial production, trucking, and rail transport - took a renewed hit.
 
It is apparent that the more globally intertwined the US economy becomes, the more important the strength or weakness of the US$ will be to its overall economy, including domestically.
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