Worries of Resurgent US Manufacturing Tanking Again Soon
Source: The Economist
The way the mainstream media has been reporting things about the US manufacturing sector, you half expect to see a panoramic black-and-white-TV-style series of shots reminiscent of “Leave It To Beaver flash before your eyes after each story you read; beaming middle-class families driving huge Buicks (those coming nonstop off the lines, with countless happy line workers doing their part), and on the weekends cavorting around their comfortable houses, clinking glasses, having picnics on checkered cloth blankets. No layoffs, no high prices, no strife.
We all know that’s not really the case, not remotely. But even we at MetalMiner overstate the case for the broad manufacturing rebound, and that’s why the folks over at Shopfloor and Manufacturing.net are keen enough to point it out. They cite a recent front page story from the Washington Post highlighting the Rust Belt recovery, the most recent in a spate of “good news for the US manufacturing sector. (Other stories from the Economist, the FT and Forbes.com are brought up as well.) The post ends with, “when do the backlash stories begin?
A fair question, and we wonder the same thing. That’s the bad news. The good news, however, comes from one of those previously mentioned trend-story-spouting outlets, the Economist, about nearshoring multinational operations.
“Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America, Hal Sirkin, of the Boston Consulting Group, told the publication. Essentially, labor arbitrage in China (as we wrote in a previous post) is becoming harder to achieve, making the US Rust Belt, among other international regions, a more attractive option for heavy industrial manufacturing. BCG is banking highly on this; hence, their prediction of a “manufacturing renaissance in the US.
Will reshoring/nearshoring be the singular saviors of the industry? Hardly. But an interesting point-counterpoint nonetheless.
–Taras Berezowsky
One Comment
Taras:
Nice piece. I worry about the near-term picture for manufacturing but share BCG’s optimism about manufacturing over the long haul. There is a bigger demographic that bodes well for manufacturing. Back in July of 2008, Goldman Sach’s issued a report that predicted that “we are in the middle of an unprecedented explosion in the ‘world middle class.†To the best of our knowledge, those predictions have tracked fairly closely to actual demographics. Between 2008 and 2018, approximately 750 million people will join the ranks of the middle class (defined as those with incomes between $6,000 and $30,000 PPP). 250 M of those people will come from nine BRIC/N-11 countries. In recorded history, no socio-economic expansion on that scale even comes close. That’s a lot of people who can suddenly afford to buy cars, televisions and i-pods and it certainly bodes well for manufacturing (and metals demand) over the long haul.