"While the manufacturing sector grew in the long term from 1992 to 2007 (adjusted for the crisis year 2001) with an average annual rate of 3.3 percent – more slowly than real GDP grew (4.6 percent) –, this ratio has reversed since 2010. In the years 2010 to 2012 the growth in real value added of the manufacturing sector was 5.2 percent annually, while real GDP only grew by 2.1 percent. This shows that the manufacturing sector grew more than twice as fast in recent years than the U.S. economy in general.
This recovery, however, must mostly be seen as a backlash to the crisis-related slump in 2008 and 2009. While the overall economy during this period shrank by 3.4 percent, the manufacturing sector contracted by 14.4 percent, more than four times the overall economic slump. That the rapid growth of the manufacturing sector can hardly be seen as a new “industry boom” is demonstrated by absolute figures: With a real value added of 1.68 trillion U.S. dollars in 2012, the manufacturing sector had not completely reached its pre-crisis level of 1.69 trillion U.S. dollars in 2007.
If there was a large-scale re-industrialization taking place in the United States, there would have to be an expansion in production capacities in the manufacturing sector. Such an expansion could not be observed so far. The average annual growth rate of production capacities for the years 1995 to 2013 was 2.4 percent. The annual rates of change in the years relevant to the re-industrialization theory (2010-2013) are sometimes even below that. The fact that the manufacturing sector does not seem to be driven by the need to expand its existing capacities so far is also indicated by the current degree of capacity utilization. Over the years 1992-2007 (omitting the crisis years 1991, 2001, 2008 and 2009), capacity utilization was 79.4 percent. In comparison, from 2010 to 2012 it was below average at 73.7 percent.
An essential argument in favour of the re-strengthening of the U.S. manufacturing sector is the increase of employment. Between 2010 and 2013 over half a million employees were hired, which constituted the most significant increase in 15 years. However, it is important to consider that large portions of the U.S. American labour market experienced an increase in employment figures in the course of economic recovery. Furthermore, the manufacturing sector with its 12.3 million employees (2013) is still far removed from its pre-crisis employment level (13.7 million employees in early 2008). What can be observed here is not a convincing sign of re-industrialization, but rather a moderate recovery from crisis-related mass lay-offs.
However, compared to important competing countries, the U.S. manufacturing sector finds itself in a favourable situation. The United States has cut labour costs considerably since 2000, whereas labour costs rose significantly in the major competing countries, such as Germany, France and Canada. U.S. manufacturers enjoy another competitive advantage: Due to the shale gas and oil boom, natural gas, crude oil and electricity are significantly cheaper in the United States than in the competing countries.
Wage differentials and energy costs as factors promoting a re-industrialization are often overrated in contrast to differentials in productivity development, freight costs, growth differences and tax loads. Energy costs are a small portion of input costs in the overall processing industry (an average of two percent in 2011). The share of energy-intensive sectors in U.S. industrial production in general (specifically aluminium, steel, synthetics, basic chemicals, fertilizers) fluctuates, depending on definition, between 7 percent and 25 percent. Effects on overall industrial production are therefore likely to be limited. Moreover, it appears that the shale gas boom has levelled off and that many forecasts have overstated its magnitude.
Low energy costs rather provide for more growth and more consumption indirectly than directly leading to more investment in the U.S. industry. Increasing labour productivity, the relative loss of competitiveness in other countries (esp. that of China), the trend toward shortening complex production chains, and the relatively larger significance of transport costs are many reasons for the stability of the U.S. industrial sector.
Therefore, whether a »re-industrialization« of the U.S. economy is really taking place remains to be seen.. Whether manufacturing companies will benefit more strongly from low energy prices in the future is an open question and depends, apart from the relative share of energy costs in production, on many other factors, such as taxes, infrastructure and the energy policies of other countries".
Source: BDI, by
