Is the US Manufacturing Renaissance Sustainable?

Manufacturing activity as a share of U.S. GDP has been in steady decline for several decades. However, over the past two years there have been signs that this downward trend is abating. Evidence of the shifting tide is most apparent in durable goods output, especially in computer and electronics, motor vehicles and machinery, passing their pre-recession peak in the third quarter of 2011.

. . . Because manufacturing processes are often very energy intensive, favorable energy prices in the U.S. have proved particularly important to the re-shoring theme. Industries set to benefit most from these lower energy prices include organic chemicals, resins, agricultural chemicals, petroleum refining, metals (i.e. iron and steel) and machinery.

. . . Tax policy is another factor that can influence decisions as to where a company will locate various business activities. The individual tax rate is also very important to manufacturers as two-thirds of manufacturers are flow-through entities and pay taxes at individual tax rates.

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