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3 Signs the Manufacturing Revival Will Continue

3 Signs the Manufacturing Revival Will Continue

January 3, 2014

Expansion in the manufacturing sector will be fueled by continued reshoring, according to Manufacturing Jobs for the Future, a new report from Sen. Amy Klobuchar (D-MN) and the Democratic Joint Economic Committee.

Klobuchar says several companies including General Electric and Ford have announced plans to move overseas production to the U.S., with several key factors driving the reshoring movement.

  • Improved U.S. worker productivity. Annual manufacturing productivity growth was 3.4 percent in the U.S. between 1987 and 2008, according to a 2009 report from the Executive Office of the President. This growth "is occurring at the same time that labor costs among key competitors, such as China, are increasing," the new report says.
  • The increased cost of extended supply chains. "High oil prices can make it expensive to ship raw materials overseas and then transport finished products back to the U.S. market," according to the new report. Extended supply chains also introduce greater risks.
  • Ready access to cheap natural gas. Crude oil production exceeded imports for the first time since 1995 in October 2013, the new report says. "U.S. natural gas prices are less than half of what they are in Europe or Asia," which equates to cheaper energy for most U.S. companies and cheaper raw materials for those U.S. manufacturers that use natural gas as a direct input in the production process.

The desire for successful innovation may also contribute to U.S.-bound production shifts in the future, according to the new report. The U.S. has stronger intellectual property protections than many other countries, and U.S. companies that locate research and development facilities and production facilities in close proximity enjoy synergies that enable successful product development.

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