U.S. Manufacturing costs are almost as low as China’s

Discussion in 'The Economy' started by Pathfinder, Jun 2, 2016.

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  1. Pathfinder

    Pathfinder Lieutenant Colonel

    Dec 17, 2015
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    U.S. Manufacturing costs are almost as low as China’s, and that’s a very big deal

    Brian Dumaine

    You don’t need to a Nobel Prize in economics to know that the fracking revolution has been good for the U.S. What’s not so well known is just how competitive cheap oil and gas has made American manufacturing. BCG, the Boston consultancy, estimates the average cost to manufacture goods in the U.S. is now only 5% higher than in China and is actually 10% to 20% lower than in major European economies. Even more striking: BCG projects that by 2018 it will be 2% to 3% cheaper to make stuff here than in China.

    Part of the reason for the narrowing gap is that wages have been rising in China. And American companies have been boosting their productivity faster than many of their international competitors. But perhaps the single largest factor is that fracking has helped dramatically drive down the price of oil and gas that’s being used in energy intensive industries such as steel, aluminum, paper and petrochemicals. BCG calculates that U.S. industrial electricity prices are now 30% to 50% lower than those of other major exporters.

    surya kiran and AMDR like this.
  2. VCheng

    VCheng Officer Candidate

    Sep 9, 2016
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    It is not just productivity, it is also efficiency. A comparison of Barrels of Oil Equivalent per dollar of GDP produced highlights this advantage very well.