How the US got its manufacturing groove back
William F. Shughart II
...It is easy to see the renaissance on the Texas Gulf Coast where both foreign and domestic companies are investing billions in the petrochemical business which uses the cheap natural gas.
Energy is the real key to America’s manufacturing boom. A report on the health of the U.S. manufacturing sector, released last year by Boston Consulting Group, projected that natural gas and electricity would account for just 3 percent of manufacturing costs this year. In contrast, natural gas and electricity were projected to account for 7 percent to 13 percent of manufacturing costs in Japan and Europe.
The latest data from BCG have revealed that China’s manufacturing cost advantage over the United States – the source of so much hand-wringing over the years – has fallen from 14 percent in 2004 to just 4 percent today. As Chinese wages continue to rise, and Chinese energy prices probably as well, don’t be shocked to see U.S. manufacturers close the remaining gap quickly.