Manufacturing is projected to be cheaper in the United States than in China by 2018. That news comes as manufacturing companies say they’re getting a boost as companies begin spending cash they’ve been sitting on.
Only seven of the 25 largest exporting countries had lower manufacturing costs than the United States, according to Associated Press coverage of a Boston Consulting Group report issued Friday.
Since 2004, U.S. manufacturers have improved their competitiveness, compared with every major exporter except India, Mexico and the Netherlands.
In 2004, for example, manufacturing in China cost 14 percent less than manufacturing in the United States. By this year, the China advantage had narrowed to 5 percent. If the trends continue, Boston Consulting found, U.S. manufacturing will be less expensive than China’s by 2018.
During the past decade labor costs, adjusted to reflect productivity gains, shot up 187 percent at factories in China, compared with 27 percent in the United States. The value of China’s currency has risen more than 30 percent against the U.S. dollar during the past decade.
A separate AP report detailed strong financial results from companies such as General Electric, Honeywell and Caterpillar.
Several companies have cited strong orders, which means that other large companies are investing in expensive equipment they need to grow their businesses, economists say.
"We're on the brink of that inflection point where the economy can really take off," says Diane Jaffee, a portfolio manager and managing director at the Trust Company of the West. "What's different now is that the industrial companies are saying there is real demand."
In the years since the Great Recession, big manufacturers were too worried about some part of the global economy to hire people or buy equipment that takes years to pay off.
Now, finally, the economies of the United States and Europe are showing steady progress, and although Chinese growth appears to be slowing, it remains strong.
"U.S. gets a little bit better every day. Europe is improving. The growth markets continue to expand and will provide growth during the year, even with volatility," General Electric CEO Jeff Immelt told investors last week.