25 January 2007
Manufacturers keeping production at home
U.S.-made consumer goods such as TV sets and kitchen appliances can compete.
The Wall Street Journal reported data from the Federal Reserve contained some surprises for anyone who thought U.S. companies don’t make things for American consumers anymore.
In its monthly update on factory output, the Fed reported U.S. production of audio and video equipment surged about 2% in December and was up 23% for all of 2006.
That is a significant change from several years ago, when the numbers were negative as U.S. production moved overseas. Even output of appliances, though down for 2006, popped 5% in December.
The shift does not necessarily represent a renaissance. More likely, it reflects the fact that much of what can go abroad already has, leaving behind what can and should be U.S. made.
One area of strength: high-end goods like top-of-the-line $6,000 Sony Grand WEGA TV sets and $15,000 Sub-Zero PRO 48 refrigerators, which appeal to the affluent folks who have been driving much of the growth in U.S. consumer spending.
“It’s the very high-end products,” said Daniel Meckstroth, chief economist at Manufacturers Alliance, a trade group. “Manufacturers who have niche markets in high-end products have a very good outlook.”
Such manufacturers account for only a tiny fraction of U.S. output and employment.
Still, the numbers illustrate an important point about the physical and strategic limits of globalization: In just about any possible future, there will always be some business that is better done close to the customer.
The obvious examples are home building and services such as restaurants, but the logic also can apply to certain types of manufacturing.
“If the thing being sold to the U.S. market is locally customized, delicate, or very large, chances are it’ll continue to be produced in the U.S.,” said Bruce Greenwald, professor of business and economics at Columbia University in New York. The same, he said, is true “if the manufacturing process itself involves almost no labor, like medical testing or like some very automated electronic-component manufacturing plants, chemical plants, and metal-fabricating plants.”