Small makes it big: Industry Trends & Analysis

I’m not quite sure whether to trust the veritable cascade of good news about U.S. manufacturing. After all the bad news we heard from 2008 to mid-2010, this good news is a bit disorienting.

The Great Recession left manufacturing a seeming smoking ruin, but the sector has grown for 20 straight months as of this writing, and, in terms of growth rate, is well ahead of the overall economy. It’s one of the few sectors leading the U.S. out of the recession.

Of course, a lot of that growth is just making up for the catastrophic drop in manufacturing output during the downturn, but there may be something else happening as well.

The current upturn may be the beginning of a long-term reversal of fortunes in U.S. manufacturing. According to a new report by The Boston Consulting Group, the era of widespread offshoring of manufacturing from the U.S. to China is ending. By 2015—driven by productivity growth and relatively low wages compared to other developed countries—the U.S. may be slightly ahead of China in producing manufactured goods for sale in North America. Rapid wage growth in China and currency trends should push reshoring along.

The BCG report also noted that the products now more attractive to produce in the U.S. include those made in small lots and those that involve multiple design changes.

That analysis matches up well with other changes taking place in U.S. manufacturing. While the U.S. has suffered well-publicized losses in market share in highly visible industries, such as auto manufacturing, and the complete loss of share in others, such as consumer electronics, less-visible but still vital small- and medium-scale manufacturing is assuming growing importance in the U.S. economy.