5 Key U.S. Manufacturing Arenas Poised for Growth in 2016 and Beyond

The 2015 Colorado CEO Forum featured a keynote presentation by Brian Beaulieu, CEO of ITR Economics, forecasting positive futures for U.S.-based manufacturing companies. While 4Q 2015 reporting still presents a 3.4 percent deficit in manufacturing growth to attain pre-2007 recession production levels, U.S. manufacturers are generating more output than ever before. The Board of Governors of the Federal Reserve System projects ongoing growth in five key manufacturing arenas: near-sourcing; technology; capital vs. labor; energy; and consumer base. (Board of Governors of the Federal Reserve System)

Industrial Production: Manufacturing

Near-Sourcing

Canada is experiencing manufacturing loss at the expense of increased U.S.-based manufacturing processes. (CBC) Canada’s restrictions on labor and environmental conditions are contributing to significant manufacturing losses from Canada-based manufacturers to both U.S. and Mexico-based manufacturers. The convenience of proximity is instigating noticeable growth among U.S.-based manufacturers. Per Beaulieu’s presentation, the U.S. and Mexico are the only two reporting countries where manufacturing industries are experiencing growth.

Technology

U.S.-based technology manufacturers continue to rank among the highest in manufacturing growth per industry. (Brookings) Labor shortages in countries like China and India are forcing manufacturers to embrace technology solutions, such as robotic assembly and processing, in lieu of labor workers. In the coming years, U.S.-based manufacturers will continue to benefit from highly accessible and increasingly affordable technology solutions to streamline manufacturing processes.

Capital vs. Labor

Countries like China are experiencing manufacturing labor shortages due to location and work demands. The Economist prognosticated the end of China’s “cheap labor” with projections detailing a dual increase in China’s currency and shipping costs by as much as five percent and labor wages by as much as 30 percent. (The Economist) With a more even playing field in manufacturing costs, North American manufacturing firms are electing to remain closer to home for their ongoing manufacturing needs.

Energy

Advances in wind, solar, electric and fossil fuel technology are reducing coal-based operation costs for U.S.-based manufacturing firms. A stable energy development and refinement groundswell is further optimizing energy usage and costs into 2016.

Consumer Base

With increasing population growth, the U.S. consumer base is also continuing to expand. Post-recession spending is now surging past pre-2007 numbers. Consumer spending grew by as much as 2.9 percent through Q2 and Q3 2015, a trend that’s since slowed into Q4 but is expected to rise again into 2016. (Reuters)

These five manufacturing arenas are poised to accelerate U.S.-based manufacturing growth into Q1 2016, while international manufacturing continues its evolution into a new era of manufacturing affordability.