Market experts note manufacturing boom will occur in coming years

April 9, 2012

Investors have favored emerging market countries as a potential investment in the past several years for new manufacturing projects, but these individuals may begin to favor the U.S. as a destination for their capital due to the re-emergence of American industry.

The Wall Street Journal reported that the American manufacturing sector now boasts plenty of skilled workers, cheap and abundant sources of energy, stable institutions and a large middle class that likes to spend money.

These factors make the U.S. a potential center for manufacturing in the coming years, especially because of the sector's recent performance. The industry expanded for the 32nd straight month in March, along with contributing more than 25 percent of the jobs that were added in this period.

Neil Dutta, U.S. economist at Bank of America Merrill Lynch, told the Journal that there are three trends that America's "manufacturing renaissance" is just getting started. He noted that the cost advantages of outsourcing work are narrowing, emerging market wages are rising and high oil prices have made shipping more expensive.

Dutta told the news source that people need to realize that manufacturing is not related to toys and small goods, but rather sophisticated machines that need intelligent workers to build the products and oversee production.

Further expansion of the U.S. manufacturing sector should occur in the coming years because of the available talent pool, Peter Morici, professor of business at the University of Maryland told Industry Week. He noted that technology and the developed infrastructure that is available to American businesses should play a significant role in the growth of the sector.

"U.S. technology should be bolstering manufacturing– that’s how Germany remains a leader in factory jobs . Unless the Germans are smarter than Americans, we should be able to do it too," said the professor.

The combination of technology and a weakening dollar, which makes goods from the U.S. more attractive to foreign buyers, will be supported by a boom in energy production thanks to an abundance of natural gas, according to the Journal.

Business strategy, energy costs and transportation expenditures will all be affected by the further development of the natural gas sector, helping to support gains in the manufacturing sector. Wall Street expects earnings for the S&P industrial sector to increase 13 percent for the year, according to the news outlet.