The rise of the phoenix

December 21, 2011
The rise of the phoenix

Ask anyone—Senators, brokers, traders, the average Joe or Jane in the street—even the President—what they would like for Christmas, and the chances are the answer will be: “A growing economy in 2012.”

Good news!! Looks like Christmas is coming early this year—especially as far as manufacturing is concerned. The PMI index jumped two points in November, with eight of the 18 manufacturing industries (including wood products) all showing growth, reports the Institute for Supply Management.
But wait, there’s more. Harold L. Sirkin, of the Boston Consulting Group writes:

“A resurgence of U.S. manufacturing seems to be in the offing. Wages are climbing in China at between 15% and 20% a year. In China's industrial heartland—which includes the provinces of Shanghai, Jiangsu, and Zheijang—productivity-adjusted costs are therefore rapidly converging with the costs in America's low-cost southern states. When adjusted for the productivity advantage of U.S. workers—who, in many cases, produce three times the output of their Chinese counterparts—wage rates in Chinese cities, such as Shanghai and Tianjin, may be around 30% lower than in America's lowest-cost states. Since wage rates typically account for 20% to 30% of a product's costs, this will make manufacturing in China just 10% to 15% cheaper than manufacturing in the United States.
“China's cost advantage will drop to single digits after factoring in inventory and shipping costs, with productivity-adjusted labor costs effectively converging by 2015 or so. This will make states such as Alabama, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and Texas attractive low-cost manufacturing hubs for the U.S. market.”

To some extent recession is part and parcel of any economy. Recession is the natural selection of business, weeding out the companies that are less strong, and enabling the leading companies to grow stronger. China doesn’t celebrate Christmas, and their new year only rolls around at the end of January. By that time, here’s hoping that U.S. manufacturing will have reported another two months of growth, as the nation resumes its climb back to where it belongs...the world’s leading economy! Family owned since 1963, Newport Furniture Parts is a leader in the furniture parts and wood-component industry.

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