Wages in China’s manufacturing sector have more than quadrupled since 2001, compared to a 30 percent increase in the US. Although employee compensation is still higher in the US, the cost gap continues to narrow.
When you factor in China’s higher energy costs and rapid wage inflation, manufacturers can operate more profitably on American soil.
We still believe in the long-run potential of the world’s emerging markets. But there’s a reason that foreign companies in 2012 invested almost US$80 billion in acquisitions and expansions to build their US manufacturing bases.
Manufacturing industries in 2013 accounted for 12.5 percent of US gross domestic product, climbing 150 basis points from the nadir of 11 percent hit in 2009. Investors shouldn’t dismiss this gain as negligible; this achievement marked the first time since the 1950s that the manufacturing sector’s share of the economy had grown for four consecutive years.
As more industries seek to take advantage of America’s energy advantage, this manufacturing renaissance should pick up steam.
How to Play It
Our Wealth Builders Portfolio includes a number of plays on the US manufacturing renaissance.