“It’s long been recognized that analysis of manufacturing technology orders provides a reliable leading economic indicator, as it is an indicator that manufacturing firms are investing in capital equipment to increase their capacity and improve productivity. Manufacturing technology provides a foundation for all other manufacturing,” said Douglas K. Woods, president of AMT.
Beyond manufacturing technology, overall U.S. manufacturing is robust. Despite the recent trend of offshoring, the value of U.S. manufacturing output increased by one-third to $1.65 trillion between 1972 and the 2008 recession. Even though China accounted for 19.8 percent of global manufacturing value in 2010, the U.S. was strong with a share of 19.4 percent.
“The factors that are fueling this tremendous surge are the traditional reasons that drive growth in investment, but what is unusual about the current rebound is that all factors have come together at one time. This is something that’s never been seen before and as a result we are seeing a true renaissance for manufacturing in the U.S.,” Woods said.
“American manufacturers rushed to beat the end-of-year bonus depreciation deadline. Inventories were low — something we’ve never experienced going into a recession — and that accounts for the quick rebound,” he explained. Exports are rising as American manufacturers meet overseas demand. Manufacturing technology from the U.S. is less expensive than foreign equipment, and U.S.-made goods are more price competitive than many imports due to the weak dollar.
The average age of machinery currently in use at U.S. manufacturing facilities crept up from nine years in 2007 to 13.5 years, and as demand started to increase the need for investment to replace this aging equipment became apparent. Those investments are being made in new technology.
The association said that another factor boosting U.S. manufacturing is the reshoring phenomenon. More work is coming back to the U.S. from foreign shores and there is greater foreign direct investment in U.S. facilities. The quality of work in the U.S. is proving to be more valuable than originally thought in the off-shoring investment calculation. Companies face increasing costs in logistics issues with the delivery of components and the exporting of completed products to North America. Add to that the rapidly increasing labor costs in traditionally “low-cost” labor markets, and the continued decline of labor in the overall share of total production cost, and the reshoring picture becomes clear. “When the total cost of manufacturing is calculated, the U.S. is a very favorable environment,” Woods noted.
Publication date: 01/16/2012