For anyone in the market for clothing, electronics or automobiles, now might be the right time to buy.
The strongest U.S. dollar in more than 11 years is driving down the cost of many consumer items, giving Americans more buying power.
Thanks to an improving economy, the greenback has surged more than 20% since June, replacing oil as the next check on inflation as fuel prices stabilize.
Over the past seven months, the price of imported materials has dropped, according to the U.S. Labor Department. Economists attribute the decline to lower energy prices, which reduce the cost of importing goods from overseas.
Companies especially benefitting from a strong dollar are clothing and electronics manufacturers that produce their products in countries such as India, Vietnam and Bangladesh, where the currency isn’t as strong.
The cost of imported goods and services (other than fuel) dropped 0.7% in January, the largest drop outside of a recession dating to 2002. Prices on store shelves and auto showrooms are expected to decrease as well, because retailers should decrease prices to stay competitive, analysts say.
The dollar’s rise comes as other parts of the world struggle. The euro is worth $1.06, a rate that was unthinkable just a few years when the European currency was worth $1.37.
And it may continue to go lower. A Goldman Sachs report estimates the euro could dip below $1 sometime in the next year, which would be a boom to U.S. travelers headed to Europe.
While the average consumer enjoys cheap gas and affordable apparel, the dollar’s rapid rise isn’t necessarily good for big U.S. businesses.
They could struggle to sell their products abroad because they will be too expensive for foreign buyers and, ultimately, harm their bottom lines.
The strong dollar also threatens emerging economies globally attempting to make payments on trillions worth of dollar-based debt.
A weakening inflation brought on by a stronger dollar also could pose a challenge for the Federal Reserve as it considers lifting the cost of borrowing money.
By mid-year, it will need to be decided if the improvements in the job market is enough to warrant an increase in interest rates for the first time in nearly decade or if lower prices mean they should wait until the economy further accelerates.
But for now, the stronger dollar is fueling Americans’ appetite for discount goods and services and keeping inflation down. Gregory Daco, lead U.S. economist at Oxford Economics in New York, told Bloomberg News recently you can’t expect a better environment for consumers.
