Surprise! The U.S. is Poised To Be a Rising Star in Manufacturing

After years of hand-wringing about the expense of making things in America, a new report from the Boston Consulting Group says that’s all changing. The shift is due in part to stagnant wages — at least that’s potentially good for something — and to a greater extent, the abundance and declining cost of natural gas.

In fact, there’s a bit of a role reversal underway.Five economies generally regarded as low-cost bases for manufacturing — China, Brazil, Czech Republic, Poland and Russia — are getting relatively more expensive. The reasons: wage increases, slowing productivity growth, currency swings and steep increases in energy costs. The U.S. is getting cheaper, along with Mexico. The reasons: wage stability, increasing productivity, a stable currency and, most dramatically, a sharp decline (50 percent) in the cost of natural gas since 2005, a result of the boom in shale gas. In a press release accompanying the report, BCG’s Michael Zinser said:

There are few signs that the news has caught up with U.S. companies that continue to shun the U.S. for supposedly cheaper nations. According to a recent report by the Congressional Research Service:

“Many companies are making manufacturing investment decisions on the basis of a decades-old worldview that is sorely out of date,” wrote Harold L. Sirkin, a BCG senior partner and a coauthor of the analysis. “They still see North America and western Europe as high cost and Latin America, eastern Europe, and most of Asia — especially China — as low cost. In reality, there are now high- and low-cost countries in nearly every region of the world.”

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