Wednesday, June 19

US Manufacturing a ‘Rising Star’ in the World, Says New Report

The U.S. has lost some 7.5 million industrial jobs since the employment sector hit its peak in 1979, in large part because companies chose to ship their manufacturing jobs to less-expensive overseas markets. However, that trend is reversing, and, according to a new report, the U.S. now ranks second in overall competitiveness. It trails only China.

On Friday, the report released by the Boston Consulting Group (BCG) said that the U.S. was a “rising star” of global manufacturing. It also said that China’s place as the top manufacturer was, if not being explicitly challenged, “under pressure” because of increased labor and transportation costs as well as reduced productivity growth.

Conversely, the U.S. is becoming a better market for manufacturing thanks to the lower cost of natural gas, according to BCG. As gas production from shale has become more popular, the price has dropped more than 50%.

On top of that, “stable wage growth” also makes the U.S. more attractive. Though productivity has doubled since the 1960’s, inflation-adjusted industrial wages are lower than they were then, which makes the U.S. more attractive for foreign businesses and helps alleviate the desire to outsource labor.

“Overall costs in the U.S.,” the report’s authors note, “are 10 to 25 percent lower than those of the world’s ten leading goods-exporting nations other than China” and on par with Eastern Europe.

The report also found that U.S. factories can produce goods at the same or lower costs as Eastern European manufacturers and cost just 5% less than those in China. Wal-Mart and Apple are among the companies who have made pledges to manufacture at least a portion of their products in the U.S. But, Hal Sirkin, one of the report’s authors, says that many companies are still choosing other countries based on outdated views.

“They still see North America and western Europe as high cost and Latin America, Eastern Europe and most of Asia — especially China, as low cost,” he said in a statement. “In reality, there are now high- and low-cost countries in nearly every region of the world.”

Whether or not the U.S. will be able to overtake China as the world’s most competitive manufacturer remains to be seen. But, at least for now, the U.S. manufacturing industry seems ready for long-term health.

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