Manufacturers Return to the US (GE, CAT)

May 21, 2012 by Paul Ausick

Until now, the evidence that manufacturing is moving back to the US from offshore — a process sometimes called ‘re-shoring’ — has been largely anecdotal. Manufacturing jobs have been growing according to reports from the US Bureau of Labor Statistics, but the growth has been slow. It may be about to pick up.

Some companies, like General Electric Co. (NYSE: GE) and Caterpillar Inc. (NYSE: CAT) have been expanding their US manufacturing capacity. And smaller firms, too, have been either expanding or building new capacity in the US. But numbers are a little hard to come by.

Consulting firm Accenture plc (NYSE: ACN) has a report out with data that indicates that US firms are indeed moving back home. The firm surveyed 81 senior manufacturing executives at companies that average more than $2 billion in annual revenues. The report is available here.

According to those surveyed, 65% moved manufacturing operations in the past 2 years and 43% plan to move in the next 2 years, while 62% started new operations in the same period. The US led all countries in locations where plants were closed (60% of closings were in the US) and also led in locations to which operations are being moved, with 40% of plants moving to the US.

Western Europe was second in plant closings and China leads in new openings with 54% of new manufacturing plants going to China. The US is second in new plants, with 32% of new plants opening here. China is also expected to overtake Western Europe as the second largest market for US goods within three years.

The new construction in China reflects the belief that the country’s domestic demand will continue to expand and that being able to make things locally helps with meeting customer requirements and lowering costs. For manufacturers re-shoring to the US, the reasons are the same, especially for some durable goods makers.

How much the re-shoring movement means to the US economy depends to a large degree on whether the economy can create enough jobs to buy all those goods. The key is jobs and they are still scarce.

Paul Ausick