Companies Bolster Sales Abroad to Offset Weakness at Home

SALISBURY, N.C., Nov. 16 - If the fortunes of the Power Curbers company were tied solely to business in the United States, these would be grim days at its factory on the fringes of this Piedmont town. The small, family-owned company makes machines that turn concrete into curbs, and with the American construction industry in distress, domestic sales are expected to drop at least 10 percent this year.

Tray Hawkins works at the Power Curbers plant in Salisbury, N.C. The company has been increasing its overseas sales.

But fortunately for Power Curbers, and indeed for the national economy, the company has transcended geography. Aided by the falling dollar, which makes American goods cheaper on world markets, Power Curbers, like thousands of other companies in the United States, is tapping rapid growth abroad to compensate for sluggish sales at home.

"It just overlapped as if you'd scripted it," said the company's president and chief executive officer, Dyke Messinger, the third generation to head the company begun by his grandfather in 1953. "Without that foreign business, these would be some tough days. We'd have had some layoffs for sure."

As the United States heads into what many economists predict will be a substantial economic slowdown, the success of American firms in building sales abroad may cushion the blow. It could help prevent the economy from slipping into a recession.

In the first half of the year, profits earned at home by American companies grew not at all compared with a year earlier, according to an analysis by Moody's Economy.com. But profits abroad soared by 22 percent.

Caterpillar, the maker of construction machines and engines, said its North American sales fell by 11 percent during the summer, according to its most recent earnings report, as the housing and construction slowdown in the United States cooled demand. But during those same months, Caterpillar's sales surged by roughly a third in Africa, Asia, Europe and the Middle East and by 20 percent in Latin America. Overall, the company's sales grew 9 percent.

McDonald's, a symbol of globalization, said its sales in Africa, Asia, Europe and the Middle East grew at 2 ½ times the pace of sales at home.

"Look at the top 30 economies in the world: Every one is in expansion except for two - Denmark and Japan," said David Huether, chief economist at the National Association of Manufacturers. "For the next year or so, the global economy is strong."

But whether strong business abroad can in the longer term offset weakness at home is far from certain. Though the global economy has been growing at more than twice the pace of the United States economy - propelled by the breakneck development of China, Russia and India - some economists see signs of slackening.

The International Monetary Fund recently predicted a slight easing in global growth next year while warning that the downturn in mortgage markets could spawn wider troubles. If institutions in Europe follow Wall Street banks in logging huge losses on their mortgage-related holdings, that could crimp new investment and slow the economy.

European exporters are already struggling with the effects of a soaring euro, which makes their products more expensive. Factories across Asia, Latin America and Europe are bracing for the consequences of tighter American spending, which could curb demand for Guatemalan-made clothing, Chinese-built computers and German-produced cars.

Recently, economists have been debating whether it is possible for the global economy to continue expanding even if fortunes dim in the United States. Some argue that the needs of rapidly developing societies are so vast that they can compensate for slack growth in the industrial countries.

"Think of 400 million people in China going from the 6th century to the 21st century over the last 15 years," said Robert Barbera, chief economist at ITG, a brokerage and advisory firm. "The same thing is going on in India as well. That's still the big driver for growth. It could self-destruct for any number of reasons, but that underlying story is decades away from being over."

But if that is the future, some economists assert that the present remains shaped primarily by conditions in the United States - by far the world's largest economy. If declining house prices cause Americans to spend less, that would most likely diminish demand for, say, DVD players made in factories in southern China. And that could in turn limit demand for the American-made chips at the heart of DVD players and the American-made machines used to build them.