#531. Short Term and Long Term Trends, and the Government – Part IPosted on
Short Term and Long Term Trends, and the Government – Part I
For the past five years we’ve been following and monitoring some global trends that could dramatically impact American manufacturing. This week we are beginning a three-part series on the current trends we are seeing. Some of these trends are slow to develop while others are occurring much more quickly. The best summary we’ve seen of these trends was in the new book “Unleashing the Second American Century” by Joe Kurtzman, senior fellow at both Wharton and Milken Institute. He sees four major trends impacting a second resurgence in the USA:
- Soaring levels of creativity: No one comes close and the USA continues to influence and change the world’s culture
- Massive energy reserves: The USA is poised to become energy independent by 2020 and a major new exporter by 2025
- Gigantic amounts of capital: Trillions of dollars are in private hands, waiting to be deployed
- Unrivaled manufacturing depth: The wealth of knowledge, low energy costs, and easy access to capital makes the USA the top choice for new manufacturing plants
Kurtzman lists 89 major new projects that have been started in the past three years, totaling $65 billion of investment, in chemicals and fertilizer (62 projects); steel (14); tires (4); plastics (4); natural gas to liquids (2); glass (1); and machinery (1). The real “game changer” for the USA is the chemical projects which are rapidly driving down the costs of basic chemicals in this country. In 2014, there was already a 30 to 40 cents/pound advantage on chemicals that were selling worldwide for 75 cents/pound! But, the real impact of these raw material production facilities will really start to ramp up in about five years, in the phase 3 of the manufacturing renaissance.
The Boston Consulting Group (BCG) 2014 study, “The Shifting Economics of Global Manufacturing”, ranked only two countries as “rising stars” for global manufacturing firms, the USA and Mexico. As to the BCG’s top countries for competiveness, the USA ranked #2 behind only China.
Each month the Institute of Supply Management surveys manufacturing firms on employment, production, inventories, new orders, and deliveries, developing an index of manufacturing activity. Any reading over 50 shows growth taking place in the manufacturing sector, a level the index has been above since 2009. In the past 35 years, the ISM manufacturing index has only exceeded the level of 59 five percent of the time. It reached this level in three separate months in 2014!
The USA again set a new record for manufacturing production in 2014, exceeding the previous record set in 2008. And, 2015 is on track to be yet another new record.
Next week we will continue this report with a look at global demand and growth, as well as the impact on the commercial real estate market.