If you happen to be in or around Chicago this fall, head on down to McCormick Place. That’s where one of the world’s largest manufacturing shows, International Manufacturing Technology Show (IMTS), will take place from September 10 – 15. The show comes to Chicago every other year, and ever since the recession, the show has grown and grown, filling up every single hall in the Windy City’s massive convention center. IMTS’ success largely hinges on the success of the U.S. manufacturing sector – and that’s a sector that’s been booming, more now than ever.
Specifically, the U.S. manufacturing industry is growing at a rate that hasn’t been seen in more than 20 years. Over the past year, more than 325,000 jobs have been added to the sector – the most since 1995 when some 345,000 jobs were added. In 2017, gross output from U.S. manufacturers was about $6 trillion.
So why the surge? Let’s examine:
The Tax Cut
In late 2017, when Republican lawmakers stumped for tax reform, one of their big talking points was that it would provide a big boost to the overall economy. In fact, when non-partisan studies indicated that tax reform would not be wise from a national budget standpoint long-term, policy backers defended it, saying that the growth of the economy would more than offset any projected losses. So far, and at least when it comes to the manufacturing industry, lawmakers appear to be correct. The manufacturing sector is proof of this.
Automotive Gains
Is there anything more synonymous with manufacturing than the automotive industry? The two have gone hand-in-hand for so long, so it’s no surprise to see a healthy automotive industry giving way to a healthy manufacturing industry. As domestic automakers bring more of their operations back into the country (again, something that’s made more feasible by tax reform), they’ll be adding domestic jobs to fuel this growth. But assembly plants are hardly the only aspect of the automotive industry that’s growing – the supply base is as well. Take South Carolina, for instance, a state that’s now home to more than 400 suppliers and manufacturers in the automotive industry.
Can Manufacturing be Derailed?
Certainly, there’s a bit of unease in the air regarding how things will play out with the back and forth tariffs being issues between the U.S. and China (not to mention other countries) in everything from automotive to packaging. Tariffs just make materials purchased from overseas more expensive to attain, and metal is often purchased from China to build vehicles. Caterpillar, which sells more than half of its vehicles outside the U.S., is already feeling a bit nervous. But, there are also reports that Toyota’s compact value vehicle – the Corolla – could cost an extra $1,200 or so because of the tariffs. Are consumers ready and willing to pay higher prices? That’s a big “if” that could slow momentum in the manufacturing sector.
It’s also important to note that while manufacturing is booming, it’s not what it once was – and that’s OK. Back in the early 1950s, U.S. manufacturing was responsible for more than 28 percent of the nation’s gross domestic product. Today, it’s only responsible for about 11.5 percent, so there’s unquestionably been a decline in manufacturing since its post-World War II heyday. But the strength of the industry today far surpasses what it was 10 years ago.
Case in point: In 2008, the aforementioned IMTS show was one of great uncertainty – one defined by manufacturing professionals as just happy to be employed. In 2010, there were signs of a resurgence in the making, to the point where attendees were far more optimistic about both the near-term and long-term outlook. That optimism improved from there on, eventually making its way to certainty. That’s why if you’re planning to be in Chicago this September, it’d behoove you to stop into McCormick Place even for a short while. Beyond the milling machines, spindles and 3D printers, you’ll see an industry that’s as healthy as it has been in a long time. And while there are potential roadblocks it may have to navigate, it’s unlikely to be decimated to the point that it was just a short decade ago ever again.
Regards,
Ethan Warrick
Editor
Wealth Authority
