Manufacturing has been returning to the United States in the last few years. After several decades of exodus of manufacturing to areas like Southeast Asia, China and India, recently there has been return to the United States.
Factors Affecting American Manufacturing Before and Now
In 2015 and beyond, this trend is expected to continue. There are many factors that affect this situation.
Here are just a few:
Increasing costs overseas – A lack of workers in other countries increases wages for skilled employees, increasing the costs of doing business.
Decreased energy expenses – Energy costs in the US are near record lows making production in America more profitable. With the new fracking technology, an increase in solar and wind energy and increased energy efficiencies throughout the system, energy is expected to stay low.
Changes to the American tax code – Many Federal tax laws have been changed and many states have significantly reduced or eliminated corporate taxes making it even more profitable to do business in the US.
Labor law changes – As many US states pass “Right to Work” legislation, the power of unions to demand higher wages has decreased. This has many companies leaving unionized countries in Europe to take advantage of a more relaxed, business-centric work environment.
International Costs Increases Driving American Growth
According to information from Manufacturing Business Technology, nearly half of CEOs of manufacturing expect to see profits rise in 2015 and over two-thirds expect to see orders rise.
This same information also points to a major factor that is increasing American manufacturing: costs in China and other countries have been on the rise by double digit percentages for decades. Meanwhile the costs in the US have been decreasing slightly.
What the Experts Say
According to an article from Bloomberg News, published by NorthJersey.com, manufacturing growth in the US is slowing due to weakness overseas.
“The plunge in oil prices is limiting sales at manufacturers such as Caterpillar Inc. while slower growth from Europe to China and the strengthening dollar represent another hurdle for American exports.”
“Over the past two years, we have seen significant growth in American manufacturing,” said Eric Kleinsorge, CEO of the World Economic Development Alliance in telephone interview. “We haven’t noticed a slowing in the number of projects. In fact, the only sector that seems to have softened recently is oil and gas. All other manufacturing sectors still appear to be going strong, from the Main Street level.”
One traditional industry that can expect to reap the benefit of the strengthening American manufacturing sector is steel.
While the weakening of the oil and gas sector can be expected to have a negative effect in the first half of the year, both steel usage and oil prices are widely expected to rise in the second half of 2015 and into 2016.
According to Zacks.com, housing and other sectors show a “ray of hope” for the industry despite pressures.