US manufacturing gains in competitiveness against China, Brazil

US manufacturers gained in competitiveness over the past decade against factories in China, Brazil and most of major world economies.

According to a study by The Boston Consulting Group, rising wages and higher energy costs have eroded the long-standing edge that China enjoyed over the US. The boom in US shale gas production too has added to US competitiveness, as it cut natural gas prices and reduced the cost of generating power.

BCG released its report yesterday on manufacturing costs in the 25 biggest exporting countries. Only seven of those countries had manufacturing costs lower than the US did this year. Also since 2004, US manufacturers had improved their competitiveness as against every major exporter except India, Mexico and the Netherlands.

For example, in 2004, manufacturing in China cost 14 per cent less than US manufacturing. By this year, the China advantage had narrowed to 5 per cent, and if the trends continued Boston Consulting found, US manufacturing would be less expensive than China's by 2018.

The past decade had seen labour costs, adjusted to reflect productivity gains, shoot up 187 per cent at factories in China, as against 27 per cent in the US.

The value of China's currency also increased 30 per cent against the US dollar over the past decade.

Meanwhile, according to BCG's new ranking of competitiveness of the world's top 25 exporting countries, the US was once again a "rising star" of global manufacturing thanks to falling domestic natural gas prices, rising worker productivity and a lack of upward wage pressure.

The report, released yesterday by the Boston Consulting Group (BCG,) found that while China remained the world's No 1 country in terms of manufacturing competitiveness, its position was "under pressure" due to rising labour and transportation costs and lagging productivity growth.

The US, meanwhile, which had lost nearly 7.5 million industrial jobs since employment in the sector peaked in 1979 and production shifted to low-cost countries, now stood at the No 2 position in terms of overall competitiveness, according to BCG.

The report points out that the country's attractiveness, according to BCG was "stable wage growth", which meant, in inflation-adjusted terms, US industrial wages were lower today than they were in the 1960s even though worker productivity had doubled over the same period of time.

"Overall costs in the US," the report's authors write, "are 10 to 25 percent lower than those of the world's ten leading goods-exporting nations other than China" and on par with Eastern Europe.