Once one of the top manufacturing powers in the world, the United States has since lost some of the luster that accompanied its industrial production. Here at Clark Schaefer Hackett, we’ve witnessed China claim the top spot for manufacturing output over the past several years, with additional gains reported for the eurozone, Japan and several other countries. However, the U.S. recently began its climb back up to the top of list.
In fact, we’ve spotted a number of notable trends that have emerged in this sector, providing an avenue of optimism for manufacturing business owners throughout the country. A reversal of economic conditions has further helped propel total U.S. production and cost competitiveness back up with the global leaders. For many, this is right where the nation belongs, but the shifting climate in manufacturing could present problems for employers and workers. Amid the many industry reports, here are a few that may be of interest to you:
Cost competitiveness shifts across globe
The growing trend of manufactured goods emerging from China has been attributed to the low costs of doing business there – labor and materials are cheap, while productivity remains high. In contrast, the U.S. slipped toward the bottom of the list of cost-effective manufacturing destinations, helping to fuel the decline in manufacturing productivity.
However, that has changed, according to a new study from Boston Consulting Group. The U.S. is now second – behind only China – in cost competitiveness. Essentially, it isn’t as expensive as it once was to produce goods stateside. The most cost-effective nations are now spread throughout the world, found in North America, Asia and Eastern Europe.
“Many companies are making manufacturing investment decisions on the basis of a decades-old worldview that is sorely out of date,” said Harold Sirkin, senior partner at BCG and coauthor of the study. “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. In reality, there are now high- and low-cost countries in nearly every region of the world.”
Manufacturers report strong production gains
In addition to the shift in cost competitiveness, a number of positive economic gains have been reported for the manufacturing sector. Data released by Markit has shown a strong second quarter for many U.S. businesses.
The financial information services provider’s U.S. Manufacturing Purchasing Managers’ Index indicated that production has grown at a pace not seen in more than three years. The PMI hit 55.4 in April, above a neutral value of 50. This, in addition to similar data, demonstrates a growth of manufacturing output levels. Attributed causes include better economic conditions, stronger domestic demand and improved confidence.
Chris Williamson, chief economist at Markit, said that the survey results highlighted a potential for additional manufacturing and economic growth in the coming quarter. He added that job creation and operating capacity have also surged throughout 2014.
Overall, we’ve noticed trends in the manufacturing sector that are a good sign. These many positive gains represent the potential for continued growth, both for domestic production and for international exports. Above all else, you could expect a bolstered bottom line over the coming year.
As a manufacturing business owner, you are under a lot of pressure to capitalize on new opportunities and grow your organization. While this can be complicated on the surface, our industry experts at Clark Schaefer Hackett have decades of experience helping professionals grow. Contact us today to start forming a partnership of trust and respect.
