The US Economy Led out of Recession by the Manufacturing Sector

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No this is not an archive article from the 1960’s this is 2010 and the US manufacturing sector is buoyant. No doubt aided and abetted by a very weak dollar, US manufacturers are finding their products both competitive and in demand around the world according to the LA Times. Unfortunately manufacturing’s share of the economy has all but halved since the late 70’s to just 11.5% but producers across a wide range of metal goods from new industrials like Nano Solar Inc to established global leaders like Caterpillar are seeing export sales up. Caterpillar exports more than most companies even make in total so when their exports pick up 20% we are talking big numbers. Export sales are up from $10.5bn last year to $12.6bn this year and the firm is hiring again says the Central Illinois News.

President Obama is trying to double exports in five years and increase research and development to 3% of the nation’s economic output. However, he can’t take any credit for the current surge — that is largely down to the weak dollar. The challenge will be maintaining that export performance and limiting imports if the currency comes back, without risking a trade war by taking overly protectionist steps. The country cannot afford the tax incentives necessary to boost R&D while it is running such huge public debt and federal deficits, laudable as the objective is.

Supporters point to the nation’s abundance of private capital and its history of turning creative ideas into commercial products. They point to continued U.S. leadership in such key industries as aerospace, biotech, optical communications and memory chips. Notably, Intel’s $2.5-billion retooling of its wafer plant in New Mexico, for example, will soon make a 32-nanometer processor, two generations ahead of the chip that Intel’s new China factory will churn out this year. But one or two success stories like this are not a substitute for developing the clusters of R&D, high tech manufacturing and support services required to keep the US at the forefront of modern manufacturing. The reality is as manufacturing is shifted overseas, the supply chains are lost and bringing that manufacturing back in the future becomes increasingly difficult without those established supply chain services. Fortunately in the metals industries although manufacturing capabilities have been slimmed down in the last 20 years the US is still home to some of the most sophisticated steel and non ferrous metal forging, rolling, extruding and treating companies in the world, but their numbers are dwindling. Take aluminum extruders for example. Where rolling companies have weathered the recession relatively well, several extruders have gone out of business like Indalex. Some facilities will be preserved but many will be closed down permanently.

Although it is highly encouraging to hear US manufacturers are doing well presently we would suggest there should be no let up in the government seeking to find ways of encouraging manufacturing enterprise with a favorable tax and regulatory regime because the dollar will not always be weak. As we know only too well the good times do not last forever.

–Stuart Burns

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