As manufacturing costs drop, being 'made in the USA' is profitable once again
Export manufacturing is the largely unsung hero of the economic recovery
Little things - mean an awful lot. Export manufacturing has become the unsung hero of the economic recovery, a new study shows. As production costs continue to drop, it's once again profitable to declare - "Made in the USA."
The U.S. is luring new businesses due to lower costs of labor, (adjusted for productivity), natural gas and electricity.
The U.S. is fast becoming one of the lowest-cost countries for manufacturing in the developed world, according to the Boston Consulting Group, or BCG. The group argues that average manufacturing costs in Germany, Japan, France, Italy, and the U.K. will be 8 to 18 percent higher than in the U.S. by 2015.
According to the BCG report, export manufacturing is vital to the nation's economic growth. "Despite all the public focus on the U.S. trade deficit, little attention has been paid to the fact that the country's exports have been growing more than seven times faster than GDP since 2005."
The group also found that the U.S. is luring new businesses due to lower costs of labor, (adjusted for productivity), natural gas and electricity.
A Markit report released last week proved that U.S. manufacturing activity hit a five-month high in August as hiring picked up and new orders increased at their fastest pace since January.
BCG's report argues that we are currently just witnessing the beginning of a major shift in global manufacturing.
"Over the past 40 years, factory jobs of all kinds have migrated from high-cost to low-cost countries," Harold L. Sirkin, co-author of the report said.
"Now, as the economics of global manufacturing changes, the pendulum is finally starting to swing back. In the years ahead, it could be America's turn to be on the receiving end of production shifts, as more companies use the U.S. as a low-cost export platform."
BCG is optimistic that the U.S. will capture between $70 billion and $150 billion in annual exports from other nations by 2020. Two-thirds of these export gains emanating from production shifts to the U.S. from leading European nations and Japan.
The group predicts that by 2020, with more production work shifting back to the U.S. from China, between 2.5 million and 5 million American factory and service jobs could be created.
Will Happy Days be here again? BCG also believes that would mean the U.S. unemployment rate could drop by up to three percentage points from its current rate of 7.4.
"It's difficult to gauge the extent to which the U.S. economy will benefit and over what time scale," Chris Williamson, chief economist at Markit said, adding, "It is becoming increasingly evident that many companies are shifting production back to the U.S. from low-cost countries, notably China, as the advantages of having a production base in these countries fades or are re-evaluated."
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