Manufacturing Business News – Lydia Hu of FOX Business discusses the Reshoring Initiative’s efforts to encourage companies to return manufacturing to the United States.

The U.S. manufacturing sector is in the midst of revitalization as global supply chains reshuffle in response to changing economic conditions and geopolitical shocks, reversing a decades-long trend of American industrial capacity moving overseas.

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Manufacturing companies began to offshore their operations from the United States to countries with lower labor costs decades ago. But the COVID-19 pandemic, the war in Ukraine and concerns about China potentially forcing Taiwan’s unification with the mainland by force have driven efforts to reshore manufacturing — in addition to government incentives and rising overseas labor costs.

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Chris Semenuk, who manages the Tema American Reshoring ETF, told FOX Business that it took “30 years for the United States to kind of give up its lead” as a manufacturing powerhouse and that it will take “at least 20 years to reindustrialize the country a” – a trend he thinks works well.

“I think that companies over the years have noticed that they have vulnerabilities in their supply chain, dependence on suppliers or maybe dependence on certain markets,” Semenuk said. “Reshoring is a response to, or a relaxation of, some of these dependencies and we are in the early stages and I think it is a long-term, sustainable trend that will work itself out over at least a couple of decades.”

For years, China’s low labor costs made it an attractive destination for manufacturing companies, but the country’s growth in recent decades has resulted in rising wages that have changed the cost-benefit analysis for businesses to locate their manufacturing operations in China. Semenuk explained.

“I think it made sense early on when the employment rate in China, for example, was a fortieth of what they were here in the United States. But if you flash forward from 2000 to today, the employment rate is at 1.3 times where China is. now… I think that when you throw in other issues such as the cost of transportation, the cost of quality control, IP theft – when you throw in the total cost of ownership the benefits of globalization have essentially been torn, Semenuk said.

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“But in the meantime, over the last 20 years, companies have built up a lot of inadvertent exposure and dependency that has essentially been marked by the pandemic, by trade wars, by wars and conflicts. So these events are marked and the shining quality of a light. on all these dependencies that were the result of globalization,” he added. “I’m not saying that globalization was bad, I’m saying that over 20 years, globalization I think ended up causing companies to develop some dependencies that I think they didn’t realize they had.”

Opportunities to invest in US manufacturing companies that are re-shoring include many small and mid-sized companies that enable or benefit from re-shoring. (Jill Connelly / Bloomberg via Getty Images / Getty Images)

In terms of the types of businesses that are likely to benefit from the re-shoring of manufacturing in the United States, Semenuk said that companies that make electric vehicle batteries and semiconductors are high-profile examples, but the types of businesses that provide products and services that necessary for those with great names. manufacturers could stand to reap relatively greater benefits.

“There are a lot of medium and small-cap businesses that are perfectly situated to benefit from reshoring,” he said. “When we look at reshoring on the fund that I manage, we break the universe of companies that reshoring manufacturers, number one; companies that are enablers, number two; and reshoring beneficiaries, number three.”

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Employees work on an assembly line at the Dakkota Integrated Systems manufacturing facility in Detroit, Michigan, U.S., Thursday, May 5, 2022. The state’s high level of skilled workers and existing manufacturing base have been drawn to resh (Photo: Jeff Kowalsky/Bloomberg via Geti Images / Geti Images)

For example, EV and semiconductor plants generate significant amounts of hazardous waste that must be disposed of in compliance with environmental standards. Safe Harbors, a waste management company, cited growth in business due to reshoring in its latest earnings report, Semenuk said.

Other examples of major companies he noted include Ingersoll Rand, which makes compressors used in many factories, and Wesco, a supplier of electrical and communications equipment that helps integrate various components of a factory.

“This whole enabler and beneficiary space has a lot of really well-managed small and medium-sized businesses that are likely to enjoy a greater benefit in future earnings growth from re-shoring than, say, a $100 billion, Semenuk added.

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As for where the U.S. is regaining manufacturing capacity, Semenuk said, “Most of the reshoring is coming from China. To some degree, we’re seeing it from Europe… Those companies in Europe are also moving their business back or. expand the United States because they want to benefit from the incentives available through the [Inflation Reduction Act], as well as the [Infrastructure, Investment and Jobs Act], and the CHIPS Act.”

Semenuk also points to Southeast Asia and particularly Vietnam as a country where manufacturing capacity is reaching a limit due to a shortage of land suitable for large factories. He also noted that while Mexico has emerged as a popular “friendly-shoring” or near-shoring destination due to lower labor costs than those in China, challenges with moving goods to the US, security, and The consistent supply of electricity in places like Juarez has been problematic. Two intersecting lines that form an ‘X’. It indicates a way to close an interaction, or cancel a notification.

The manufacturing sector tops the estimate in January as new orders rise, prices rise: why it is bad news for inflation

The US manufacturing sector showed signs of resurgence in January, supported by a significant increase in new orders, which could mark the end of a prolonged contractionary phase.

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Data released Thursday highlighted an upward revision in the final reading of the S&P Global US Manufacturing PMI and a better-than-expected release for the ISM Manufacturing PMI.

Both assessments of manufacturing activity indicate a strong rebound in new orders. They also emphasize the rising prices of raw materials and emphasize the need for close monitoring of the latest disruptions in international trade.

“Manufacturers started the year with a spring in their step,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said.

Williamson emphasized that business optimism for the coming year rose to its highest level since early 2022, driven by a surge in demand. New orders are increasing at a rate not observed in more than a year and a half, with a particularly sharp improvement in consumer goods as households begin to feel the benefits of easing inflation and more relaxed financial conditions.

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This positive outlook is tempered by indications of rising factory prices due to supply delays, often related to bad weather and recent disruptions in global shipping.

“Therefore, some renewed pressure on consumer prices could appear in the coming months if these supply-linked inflation trends persist,” Williamson said.

“Demand remains soft but showing signs of improvement, and production execution has stabilized since December,” said Timothy R. Fiore, chairman of the ISM Manufacturing Business Survey Committee. Panelist companies will continue to manage production, material inputs, and labor costs.”

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Fed’s Rate Moves Put Manufacturing Sector At Risk

The US manufacturing sector is beginning to show signs of weakness after two years of strong growth, as higher interest rates and a slowdown in exports threaten output.

New orders for manufactured goods contracted for the sixth straight month through February, according to the Institute for Supply Management survey. Manufacturing output is down 1.7% from its post-pandemic peak in May 2022, according to a three-month moving average of Federal Reserve data. And the Commerce Department’s measure of civil capital equipment orders, excluding aircraft—the business building block—fell 3.4% in January from its most recent peak in November 2021, after adjusting for inflation.

The weaker manufacturing data suggests that consumers and businesses are starting to cut back in the face of economic uncertainty, said Jonathan Millar, senior U.S. economist at Barclays PLC. A manufacturing decline could be a sign of trouble in the broader US economy. Although manufacturing accounts for a relatively small part of gross domestic product, about 11%, it has historically been an early indicator of recession.

Federal Reserve Chairman Jerome Powell said in early February that the central bank will raise interest rates by one percentage point. Powell said further increases will likely be needed to keep inflation down. Jerome Powell, Chairman of the Council (CLAUDIO BRESCIANI/TT News Agency/AFP via Getty Images/Getty Images)

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The Fed’s aggressive move to raise interest rates to fight inflation has made it more expensive to borrow for big-ticket items like consumer appliances or business vehicles. Fed officials in early February approved raising benchmark rates to their highest level since 2007, and signaled they are likely to raise rates again when they meet later this month.

“As the Fed continues to hike, manufacturing will peak,

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