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By Jason Stipp and Robert Johnson, CFA | 07-12-2012 10:00 AM

Will U.S. Hit a BRIC Wall?

Slowing in some emerging markets likely affects other emerging markets more than it harms the U.S. economy, says Morningstar's Bob Johnson.

Jason Stipp: I'm Jason Stipp for Morningstar.

Although it may seem like it, European woes haven't cornered the market on pessimistic headlines. There are also concerns about slowing growth in the emerging markets. What does this mean for the U.S economy? Here with me to discuss is Bob Johnson, our director of economic analysis.

Thanks for joining me, Bob.

Bob Johnson: Great to be here.

Stipp: Some estimates of second-quarter U.S. GDP have come in a little bit, and part of that is due to exports weakening. Some folks think this is going to happen because of the woes we’re seeing not only in Europe, but also in emerging markets. We recently got an import-export report, the balance of trade. Does that show that we’re seeing some weakening in exports?

Johnson: Well, if you go back over a long series of data, yes, the export growth rate has slowed. We were in the 30% range in 2010; of course, that was off a terrible base in 2009. Then last year, in 2011, it was in the 10% to 15% range. And for the first five months of this year, it looks like we’ve slipped back down to 6% for total exports throughout the world. So, clearly we’ve seen a slowing there.

What was interesting in the report that we got this week is right in the middle of the European crisis, the month of May, our exports actually went up from April to May to Europe. And they certainly don’t show signs of falling off a cliff. They're not robust growth, but we really haven’t fallen of the cliff. And I think a lot of them are agricultural products, some of it is petroleum related where we refine stuff and ship it back.

So I think there are a lot of things going on in, and really we just haven't seen a falling apart yet, but it's certainly slower than it was, and we’re going to have to make up for that elsewhere in our economy.

Stipp: So, overall slowing trend, but it sounds like some of the things we’re exporting are somewhat non-discretionary, in that at least we'll have some support or a floor for exports given that.

Johnson: Absolutely right. Boeing airliners, for example. Those are on a delivery schedule; they're just going to keep coming.

Stipp: OK. So, when we’re thinking about the export market and who makes up the world economy and what our market is for U.S. goods, how do you break down the globe? ... How does [the economy] break down between U.S. and Europe and emerging markets?

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