U.S. manufacturing 'renaissance': Pipe dream or future reality?

Yahoo Finance

Despite the hope for a "manufacturing renaissance" in the U.S., a Wall Street Journal article reports U.S. factories continue to lose ground to rivals abroad.

Related: The glory days of manufacturing are not coming back

The article points out that the U.S. trade deficit widened in the first half of the year, with manufactured exports (excluding petroleum on coals) rising 0.8%, below last year's 2.1% gain. Without a "strong, sustainable increase in exports, U.S. factories are unlikely to have the kind of resurgence forecast by some pundits," according to the article.

So is the U.S. manufacturing comeback not happening? Yahoo Finance Editor-in-chief Aaron Task and I examine that question in the video above, and note some of the tailwinds for U.S. manufacturing that may benefit the sector in the future.

For example, low energy costs thanks to the country's shale revolution are supposed to help boost manufacturing. Task points out it takes a long time to make a decision about moving manufacturing based on an advantage like that, then to build the factories and start producing goods, saying the U.S. could see those developments play out in 3, 5 or 10 years. The Journal reports petrochemical exports are expected to begin rising rapidly in 2016 as new plants come online.

Related: Here's why the U.S. energy revolution has proven skeptics wrong

Also, the Boston Consulting Group says stable wages in the U.S. (e.g. stagnant wages) coupled with soaring wages in China, mean when you factor in shipping, inventory and other costs of producing goods, China doesn't look so much better for manufacturing than here at home. In fact, BCG says costs of producing in the U.S. can be roughly comparable with that of China, according to the Journal. In turn, BCG predicts reshoring could generate between 700,000 and 1.3 million new manufacturing jobs by 2020, as Yahoo Finance columnist Rick Newman has written about.

Related: Why wages will stagnate for another 14 years

There is a difference between growth in manufacturing and a renaissance, though, and in thinking about the latter possibility, there remain questions of global competition. Just because wages are rising in China relative to the U.S. doesn't mean that another developing country with lower labor costs won't be the beneficiary of that dynamic. As former Obama administration car czar Steve Rattner has written: "In a flattened world, there will always be another China."

More from Yahoo Finance

"A war without bullets": Rising trade tensions a long-term threat

Do you want some bonds with your burrito?

Putin clamps down on Big Macs

View Comments (10)