How the US got its manufacturing groove back

William F. Shughart II
Shale revolution revitalizing U.S. manufacturing
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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.
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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.

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