US manufacturing rebounds as trade deficit contracts

Posted on 19 Aug 2013

Manufacturers in the US are showing signs of reclaiming a competitive edge after losing out to China and other export nations for a decade, while one consultancy predicts “2.5m to 5m American factory jobs” from a manufacturing renaissance.

The trade deficit on manufactured goods in the US in the first half of 2013 shrank to $225 billion, from $227 billion in 2012, according to data from the Manufacturers Alliance for Productivity and Innovation, an industry funded research group in Virginia.

The modest improvement is significant as it follows years of expanding deficits as the US lost manufacturing business to China, South Korea and other low labour cost countries.

The data was gathered by Ernest Preeg, an economist and trade expert at the MAPI, who derives the calculation of manufactured-goods trade from official US data, leaving out other types of primary goods such as oil and grain. “It’s a hopeful sign,” Mr Preeg told the Wall Street Journal. “At least we’ve levelled off.”

Boston Consulting Group (BCG), a bullish advocate of the return of manufacturing in the US, last week predicted a surge in exports, helped by lower energy costs – partially derived from the shale gas bonanza – and stagnating wages.

The Wall Street Journal reports that BCG’s forthcoming report says rising exports and “reshoring” of production to the US from China “could create 2.5 million to five million American factory and service jobs associated with increased manufacturing” by 2020.

BCG says that could reduce the unemployment rate, currently 7.4%, by as much as two to three percentage points.

The full story on the US manufacturing rebound is here.