According to a recent Reuters report a number of factors are driving more companies away from Asia, including rising wages, surging fuel prices, and the complexity of transporting goods across the Pacific.
According to Daniel Meckstroth, chief economist at the Manufacturers Alliance/MAPI- “What you’re starting to see is the economics shifting more into the United States’ favor regarding sourcing from the United States versus sourcing from a low-cost country.”
One of the biggest reasons why is the subpar economic growth in the United States versus in Asia is helping its manufacturers to close the cost gap on their foreign rivals. China’s inflation rate hit 5.5 percent in May, well ahead of the United States’ 3.6 percent headline rate. With Chinese wages rising at 15 to 20 percent per year, the labor costs of manufacturing in the two countries could pull even by 2015, as we reported a few months ago. Rising oil prices, which drive up the cost of shipping goods by boat or plane, are also eating in to China’s edge.
Automation also helps tilt the balance toward the United States. For example, at Master Lock in Milwaukee, Wisconsin, they can produce 24,000 locks a day with about one-sixth the number of workers needed by the company’s Chinese suppliers and rivals because of better machines and efficiency.
Mark Andol outside of his store
A big shout out to Mark Andol in Elma, New York. If you haven’t heard of Mark, he is the owner of the “Made in America Store,” in upstate New York that has attracted quite a bit of buzz recently.
Mark’s story goes back a few years. You see, his welding company nearly went out of business after losing a major contract to sell steel posts. His company was selling them for $17. China was selling them for $14. From 2007 to 2010, he had to lay off nearly half of his 70-person work force.
His retail store has over 30,000 items for sale. His team spends about 25 hours on each item making sure that every component, down to the glue in the packaging, is 100 percent American. Keep up the good work Mark and team!
According to a recent study by Pennsylvania based market research firm Unity, the U.S. ranked highest in the world among consumers when ranked the quality of luxury goods manufactured there. Based on a scale, with 100 being the average, the U.S. scored an astounding score of 267, scoring higher than both Italy and France, two countries that most consumers associate with the highest quality products.
In addition, a recent American Express study found that consumers like products made in America, up 5 percentage points from 2008, and 65% say they try to buy U.S. brands whenever possible, a 3 percentage point gain over 2008.
According to new data from the U.S. Bureau of Statistics, 49 of the 50 U.S. States lost manufacturing jobs over the last decade. The one exception…ALASKA. Although the state only added 100 jobs over the last decade, it still is great for the state. Alaska’s prosperity can certainly be linked to the natural resource price boom over the last decade. Around this time a decade ago oil was trading in the teens to twentys, now as we all know it has crossed $100, and gold and silver have followed suit. The state that lost the most manufacturing jobs? For all those who think Michigan, think again. It is actually California with 572,400 jobs lost.
Click here for a full list to see how your state faired.
Boston Consulting Group raised quite a few eyebrows this week when they predicted that by 2015 the U.S. will be a more attractive place for companies to move their manufacturing bases to than China. Some of the notes from the BCG study include:
- Rising Wages in China plus the strengthening yuan are eroding China’s cost advantage vs. the U.S.
- America’s very productive, motivated, and flexible workforce is attractive to employers and Americans are focused on creating jobs
- Supply chain and communication issues are increasingly becoming more cumbersome in the Asian markets
Of course, you didn’t need a million dollar study from BCG to know this. If America were to make the tax structure more advantageous and eliminate healthcare and other costs, we would be far and away the first choice amongst executives. If you added a true valuation for the Yuan, versus the artificial valuation that their policy makers have been trying to maintain for years, the results would be even more dramatic.
