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How Manufacturing in the US Continues to Grow Despite Fears Over Higher Costs, Lower Percentage of GDP & Election-Year Woes

manufacturing in the US FI

On July 1, 2016, the Institute for Supply Management announced the manufacturing index rose to 53.2 in June, reports The Chronicle Herald, alluding to a potential increase in overall U.S. GDP, which holds major hopes for the future of manufacturing. Yet, the renewed scrutiny of Clinton for her emails and unstable politics continue to frighten many U.S. manufacturers into beliefs of an impending recession. While the future of manufacturing in the US has yet to be written, the overwhelming amount of evidence points toward a fresh, growing industry into the remainder of the year. As a result, you need to understand how this growth is happening.

Current Facts on Manufacturing in the US.

The conversation over reshoring versus offshoring dominates much of the news, but American companies have split their workforce by half between inside and outside of the U.S., reports Chriss W. Street of Breitbart. According to Bureau of Economic Analysis, the U.S. deficit between exports and imports was “only $1 billion more than expected,” adding to the prosperous outlook for the industry. Yet, further evidence of continued growth of manufacturing in the US can be seen in the following infographic, created by MP Star Financial:

Recession Fears Are Turning Out to Be Nothing More Than Fears.

Since 1991, the U.S. manufacturing industry has lost more than 5 million jobs, and it has struggles throughout two recoveries and one recession since that time. The first recovery was from 2001 to 2007, but it was halted with the Great Recession of 2008. The path toward recovery began in 2009 under President Obama, and 2016 marks seven years since it began. Ironically, the same time frames for recovery does not necessarily mean a recession is imminent.

The candidates for this election year also have similar policies with respect to manufacturing in the US. Both Clinton and Trump are renewing calls to end trade agreements, increase reshoring and encourage, if not penalize, manufacturers who continue to send jobs overseas. Now, some evidence does suggest a slight slowdown in specific manufacturing sectors, such as the auto industry, explains Joel Kotkin of Forbes magazine.

Rather than using this information as a call to panic, it simply should be taken at face value. In other words, auto manufacturing traditionally decreases during the summer months as manufacturers begin working on new models or designs for the upcoming year. Essentially, slight slowdowns are routine occurrences during the summer months in the auto industry. Further proof of this concept can be found in areas of the Midwest that are experiencing significant declines in unemployment rate to near all-time lows.

How Can Manufacturers Further Boost U.S. Production and Growth?

Manufacturers have an opportunity to drive growth in the U.S. economy throughout 2016 by actually using resources within the U.S. and working to change perception and legislation about the industry. Some of these measures, reports Supply Chain Digest, include the following:

  1. Focus on Research and Development – U.S. manufacturers need to consider increasing investments into R&D to drive growth in the industry. For example, many electronics may require specialized equipment to manufacture, but this equipment needs to be built in the U.S.
  2. Eliminate Repetitive Regulations – Throughout legislative sessions, Congress has continued to pass new laws to improve manufacturing in the US and compliance. Yet, older laws are never fully removed, leaving manufacturers with duplicitous, if not contradictory, compliance requirements to meet.
  3. Consider the Cons of Offshoring – The initial cost of offshoring is appealing, but manufacturers should carefully consider how offshoring can impact quality assurance and brand identity. For example, foreign countries may not protect proprietary information as thoroughly as the U.S.
  4. Promote a Value-Added Tax (VAT) – The VAT is benefiting foreign countries, but U.S. manufacturers could benefit from adding a VAT onto imports to the U.S., which could help with reshoring efforts as well.
  5. Increase the Value of U.S. Exports in the Global Economy – Globally, countries do not import U.S.-made goods due to high tariffs or export rates, but U.S. manufacturers could lower prices for exported products to make them more attractive to foreign buyers. As a result, the flow of exports would increase.
  6. Stop Overvaluing US Currency – The U.S. currency is currently overvalued by about 15 percent, which makes U.S.-made goods more expensive in foreign countries. Manufacturers should consider how a flat fee of currency conversion could be used to offset this deficit between actual and inflated value, and the fee could be dynamic in accordance with the deficit. This idea needs to be spread among manufacturers if it hopes to gain traction.
  7. Improve Automation of Manufacturing in the US – Workers are often the opponents of automation for fear of job cuts and losses, but automation opens new doors to a new type of workers, such those who repair automated equipment and work to control or program robotics. Manufacturers need to educate their workers on how automation will actually impact their duties and how it will reduce workload.
  8. Access the Potential of Graduates of Vocational Programs – An advertisement for a vocational program is displayed on the TV nearly every time you turn it on. Manufacturers should take advantage of this influx of recent grads by offering contractual debt-forgiveness programs and reaching out to these programs to provide training and education in exchange for course work. The opportunities are nearly endless.

Today’s manufacturing industry is nothing like the manufacturing industry of the past. It is on the mend, preparing for growth and experiencing growth despite fears, criticism and some deficits. However, manufacturers are in a position to further drive growth, and all indicators point toward an upward direction for prosperity, and today is one of the most interesting times to be involved in the supply chain and manufacturing industry.