The coming U.S. manufacturing recovery is the subject of several studies by the Boston Consulting Group. I’ll focus here on the most recent one, “U.S. Manufacturing Nears the Tipping Point,” which appeared in March.
What’s happening, according to BCG, is a “reshoring” back to America of manufacturing that previously migrated offshore, especially to China.
The BCG analysts estimate that by 2015, China’s cost advantage will have shrunk to the point that many manufacturers will prefer to open new plants in the U.S. In the vast manufacturing region surrounding Shanghai, total compensation packages will be about 25 percent of those for comparable workers in low-cost U.S. manufacturing states. But given higher American productivity, effective labor costs will be about 60 percent of those in America – not low enough to compensate U.S. manufacturers for the risks and volatility of operating in China.
In about five years, argue the BCG economists, the cost-risk balance will reach an inflection point in seven key industries where manufacturers had been moving to China: computers and electronics, appliances and electrical equipment, machinery, furniture, fabricated metals, plastics and rubber, and transportation goods.
The industries together amounted to a nearly $2 trillion market in the U.S. in 2010, with China producing about $200 billion of that total.
As manufacturers in these “tipping point” industries move back to America, BCG estimates, the U.S. economy will add $80 billion to $120 billion in annual output, and 2 million to 3 million new jobs, in direct manufacturing and spin-off employment.
To complete this rosy picture, the analysts forecast that in about five years, U.S. exports will increase by at least $65 billion annually.
Hold on, Dr. Pangloss. Those are just economists’ estimates. What do real manufacturers say? Well, BCG has some new numbers on that, too.
In late April, the consulting firm released a survey of executives at 106 U.S.-based companies with annual sales of over $1 billion. Thirty-seven percent of them said they were planning to reshore manufacturing operations or “actively considering” the move.
Among larger companies with sales over $10 billion, the positive response rose to 48 percent.
Talking about American decline has become a national sport among policy intellectuals.
The country still has severe political problems, but the numbers in these new studies make me wonder if some of the deep pessimism is misplaced.
Source Article from http://news.cincinnati.com/article/20120504/NEWS/305040180/US-energy-manufacturing-ready-boom?odyssey=mod%7Cnewswell%7Ctext%7CFRONTPAGE%7Cs
