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Exports likely to drive regional recovery

For the first time since World War II, the United States is not leading the global economy out of recession. Instead, China and India are pacing the recovery.

That means the U.S. companies and various regions able to export goods and services into faster-growing overseas markets will have the best chances of adding jobs during the painfully slow recovery expected in the United States.

How does the Philadelphia region - where the percentage of private-sector workers in manufacturing has fallen to 8.5 percent in August from 16.1 percent in 1990 - stack up?

In 2007, the most recent full year of data, goods exports accounted for 6.4 percent of economic activity in the 11-county Philadelphia region, including New Castle County, Del., and Cecil County, Md.

That is well below the national figure of 11.8 percent for the same year, according to data from Moody's Economy.com.

"This data would suggest that Philadelphia's economy benefits from stronger exports, but not nearly as much as the rest of the nation," said Mark Zandi, chief economist at the West Chester economic-forecasting firm.

Zandi cautioned, however, that the available metropolitan-area data understate the importance of exports to the Philadelphia region, which sends a significant amount of software, educational services, and health care overseas. That is because the data do not include such services.

For example, the goods data do not count the efforts of Philadelphia International Medicine, a cooperative of six hospitals, to bring international patients here and provide consulting overseas.

The group's business is picking up, said chief executive officer Leonard Karp. Last week, it signed a consulting contract with an Indian outfit and received a verbal commitment for a week of hospital-management training from a Brazilian customer. "It's a sign of a thaw. We hadn't had anything for quite a while," Karp said.

But it is not just the faster pace of recovery in Asia and South America that gives local companies a reasonable hope for growth. The dollar's weakness relative to other currencies, such as the euro, makes U.S. companies more competitive overseas.

"Most of the companies we call on are sort of bullish and encouraged that they find themselves in a more competitive position," said Mike Schmittlein, a managing director with Wells Fargo Global Banking & Trade Solutions. Philadelphia-based Schmittlein, who oversees five trade-finance offices on the East Coast, said the unit had hired personnel in anticipation of export growth.

Historically, chemicals, including pharmaceuticals, have been the biggest export from the Philadelphia region, according to government data, but Schmittlein said he had seen growth in companies supplying the fast-growing Asian infrastructure market.

Kingsbury Inc., a Northeast Philadelphia bearing manufacturer, is working on a part - ordered before the massive economic slump - for water pumps that will be used in nuclear power plants in China, chief executive William R. Strecker said.

The 97-year-old company, which employs 265, including 115 in Philadelphia, and is investing millions in its plant here, has for years exported 45 percent to 50 percent of what it manufactures, but Strecker said growth would come from exports. "There's not much left in the states," he said, referring to the equipment-makers to whom Kingsbury sells.

In Phoenixville, VideoRay L.L.C., which makes a small underwater robot, already gets half its $7 million in revenue from overseas and expects it to increase to 60 percent next year, when sales are projected at $10 million, said Chris Gibson, VideoRay's director of sales and marketing. That will lead the company to add marketing and support jobs to its 25-person workforce.

For the manufacturing of specialized components, VideoRay, which has seen strong demand from the Chinese hydroelectric industry, plans to use local firms. "The companies we're working with now are in Coatesville and Lancaster, and we're looking for more," Gibson said.


Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.

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