After three years of stagnation, US manufacturing appears to be on an upswing as production and order books gain momentum. Tariffs and energy costs pose challenges, but trends in reshoring, AI/robotic technologies and rising defence spending provide reasons for longer-term optimism.
he US manufacturing sector has experienced a torrid couple of decades. Output volumes remain 10% below the peak level hit just before the Global Financial Crisis in December 2007. The sector employs a million fewer workers than it did 20 years ago. Reasons for this poor performance include consumer demand preferences shifting ever further toward services over physical goods, underinvestment in advanced production facilities relative to international competitors, high US labour costs and the removal of trade barriers allowing foreign manufacturers to gain market share.
Nonetheless, the sector has shown genuine signs of a revival over the past year. The ISM production index has moved from sub-50 contraction territory to signalling robust growth ahead. Below, we look at what is driving this turnaround and how it could evolve.
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