Manufacture Renaissance to Broaden


The impressive comeback of our domestic petrochemical industry due to advances in oil and gas drilling technologies is shortly to be joined by a “renaissance” of manufacturing in other industries. A recent reportby the Boston Consulting Group (BCG) predicts that by 2015 several other domestic industries will reach the “tipping point” where companies decide to build new factories in the U.S. rather than in China or other foreign countries, in the process creating as many as 2 to 3 million jobs.

With Chinese wages rising at 15-20 percent per year,  the labor content of production costs decreasing due to higher productivity, the Yuan value increasing some against the dollar and shipping costs rising due to high fuel costs, U.S. firms making products like furniture, transportation goods and electrical equipment will find it less attractive to build in China and import to the U.S.  Adding plastics, rubber products, fabricated metal products, and computer/electronics as other industries identified by BCG could add as much as $ 100 billion in U.S. manufacturing output coming back to here.

China’s labor costs will rise above Mexico’s according to BCG(!). But the grerater availability of skilled workers in the U.S. will cause companies to locate at home rather than in Mexico.

So, perhaps the prediction of some economists that the lost U.S. manufacturing jobs will not come back has been a bit hasty. That could encourage those who have tended to call Economics the dismal science.

This entry was posted in Manufacturing and tagged , . Bookmark the permalink.

1 Response to Manufacture Renaissance to Broaden

  1. Joe Pilaro says:

    I would not bet on a long term continuation of a $2.25 natural gas price, nor would I bet on oil remaining at above $100. The ratio of oil price to nat gas price will revert to the mean when the gathering and pipeline systems across the US can move newly found nat gas and crude oil from producer to market. With that, the US resurgance of manufacturing may be short-lived. The good news is that the US balance of payments could be positively moved by exports of low cost plastics and petrochemicals that result from new investment based on the abundance of hydrocarbons. Labor-intensive manufacturing will always seek the location of the lowest cost labor. If China prices itself out of that market, then Thailand, Malaysia or Bangladesh may take it on.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.