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  Manufacturing Focus: Our Weekly Feature Article on Topics Related to Manufacturing Management  
  -August 19, 2008 -  

Supply Chain News: Decline in US Manufacturing Output Versus China Vastly Overstated, says NAM

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Strongly Disputes Last Week’s Estimate that China Will Out-Manufacture the US in 2009; US Currently has 25% Global Market Share, NAM’s Engler Says



SCDigest Editorial Staff

SCDigest Says:

Given the constraints China is beginning to face, its ability to maintain that torrid growth is highly questionable,” Engler added. Any slowdown in China’s growth could push the date China becomes number 1 well out into the future.

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Does the perception of American manufacturing differ from reality?

As we reported last week, research firm Global Insight recently updated its numbers, and predicted that in 2009 the US would lose its position as the world’s top manufacturer for the first time in more than 100 years, moving forward the 2013 date the firm had predicted just last spring as the year for that switch. (See For First Time in More than 100 Years, US Set to Lose Place as Largest Manufacturer in the World.)

But the US-based National Association of Manufacturers says those numbers are all wrong.

“I and members of the National Association of Manufacturers strongly disagree with this prediction,” says John Engler, president of NAM.

Engler says the Global Insight numbers are inconsistent with data from the World Bank and other sources. Better adjusting for prices seems to be a key factor, which Engler says better reflects the true quantity of output.

Based on that data, Engler says “The US remains by far the world’s largest manufacturer, producing nearly one-fourth of the world’s industrial output. Based on the highly respected World Bank database, our analysis also shows that we will produce twice as much this year as the fourth placed economy, China.” The European Union and Japan rank second and third in this analysis.

He adds that even in current measures of manufacturing denominated in dollars (which inflate China’s position because of the rising yuan and other factors), China will produce only about 60% as much as the US in 2008.

Engler further says that even if China continues its rapid economic growth of about 10% per year, it will take until 2020 at the earliest for China to catch the US.

“Given the constraints China is beginning to face, its ability to maintain that torrid growth is highly questionable,” Engler added. Any slowdown in China’s growth could push the date China becomes number 1 well out into the future.

(Manufacturing Article - Continued Below)


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He added that the only possible way for China to catch the US in 2009 would be a huge economic collapse in the US, well beyond anything like the current slowdown.

The actual position of US manufacturing is in far better shape than the perceptions of many, Engler added.

“Not only is the US the world’s largest manufacturer, but US manufacturing output in 2007 set an all-time record,” Engler said. “While there are more than 3 million fewer manufacturing jobs than in 2000, our productivity has grown so rapidly that today 75 workers produce what it took 100 workers to produce then.”

But, Engler does say action is needed to keep US manufacturing strong and to keep the US in front for many years. He added that “For the US to stay ahead of China and maintain world leadership, we must reduce corporate tax rates, which are the highest in the world, develop more of our domestic resources to ensure an affordable supply of energy, provide more generous incentives for research and development, train a new generation of skilled workers and move aggressively to expand exports with more free trade agreements – just as China is now doing. We also need to tackle the foreign barriers to trade that Congress has declined to remove as it holds up trade agreements with markets such as Colombia, Panama and South Korea.”

As of press time, Global Insight had not commented on the rebuttal from NAM on its data.

Is the demise of US manufacturing overstated? Whose numbers do you believe, Global Insight or NAM/World Bank? What do you think are the keys to manufacturing expansion? Let us know your thoughts at the Feedback button below.

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August 20, 2008

I agree with this article. I think this probably needs to be broken down by industry. I see Food and Beverage are probably industry segments that cannot be moved to offshore, and given the complex diversification, network complexity, perishability, and channel masters' demand; the capacity pressures are even higher. Many of our manufacturing customers have personally expressed this to me in the past few months.

Danny Halim
Vice President, Supply & Manufacturing Solutions
JDA Software Group


August 20, 2008

It is nice to see that John Engler is engaged in a significant and important role here for the US.

I was born and raised in Michigan and when Mr. Engler served his terms as Governor, he changed the face of the State and its economic performance. I cannot say enough of what he did for business and the economy.

Nevertheless, I agree that the US still has a strong manufacturing capability and with recent gains in exports proves that we can compete in this global economy. Recent transportation cost increases, the weak dollar and the increase in China wages is the right recipe for US manufacturing to prosper.

I believe that NAM should focus in efforts on large high cost transportation commodities such as; furniture, HVAC equipment, Appliances, etc, as these will be the first to move back to the US as Transportation and other factors continue to be the issue.

Please let me know if you have any questions

William L. Kincaid Jr.
Vice President
CB Richard Ellis
Global Supply Chain Practice

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