The October Purchasing Manager’s Index (PMI) registered 59 percent, an increase of 2.4 percentage points from September’s reading of 56.6 percent; clearly indicating the continued expansion in manufacturing. The New Orders Index increased for the 17th month in a row, going up to 65.8%, and an increase of 5.8 points from September’s 60%. 16 out of 18 manufacturing industries have been showing growth; with employment, inventories, demand and production volumes all increasing month on month.
Demand is strong across multiple sectors driven by holiday orders exceeding seasonal forecasts, and customers placing additional orders.
There is no doubt that customers in the USA are tired of using products which carry a ‘Made in XXXX” tag and often do not live up to their expectations on performance or quality issues. This is driving a demand for all products made in America. But, can we conclude from the above information that American manufacturing is on the rise again, and demand for American goods is growing beyond expectations? For those who fear that the result would be higher prices on the US made products, Walmart has committed to carrying $50 billion worth of American inventory on its shelves over the next 10 years, assuring that they would be competitively priced in comparison with the ‘out-shored’ products. In this process, Walmart is helping some companies in the US to revive their dwindling operations and go into full-fledged production.
For their part, American businesses have realized that by reshoring some manufacturing processes, they can be assured of better quality and inventory control, minimized logistics costs and improved ability to respond to market demands. It is estimated that if companies re-shored 25% of the manufacturing they out-shored; America could see a million manufacturing jobs being created. This deal for businesses is being sweetened further by the many tax credits, exemptions and other incentives tied to the number of jobs created.
Some realities of the Manufacturing Industry:
With over 200 companies – among which we count big names in manufacturing like Airbus, GE, Boeing, Volkswagen, Ford, and Whirlpool – choosing to bring their manufacturing operations back to American soil, there is more confidence in the way ahead for manufacturing jobs than ever before. However, this is not a simple return to the past. In fact, the growth could be in building, managing and controlling the robots that are becoming increasingly effective in the manufacturing industry. The manufacturing industry has historically offered high wages, offering a middle class lifestyle to laborers without advanced degrees. The industry has been tied to high-powered unions that controlled wages and working conditions.
Moving forward, a new normal for American manufacturing will unfold requiring highly skilled workers, a repositioning of the role of unions, and contemporary attitudes toward employer-employees relations that will redefine the industry’s reputation. Without significant changes in each of these areas, talent crunches will hinder the on-shoring trend, affecting the prospects of long-term sustained growth.
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