The stress and turmoil of the last few years has clearly failed to knock manufacturers to their knees, and instead has served to show the remarkable resilience of the sector. Not only has the American share of global manufacturing output held at around 20% of the total, it has done so by relentless attention to innovation, productivity enhancement and expanding the value proposition. In 2010, for instance, U.S. manufacturers achieved 6.7% growth in productivity and cut their unit labor costs by 4.4%.
This translates directly into a higher standard of living, as the inflation rate for manufactured goods fell 0.8% between 2000 and 2010, while total U.S. inflation grew 22%.
As we continue to recover from the “Great Recession,” manufacturing is likely to enhance its role as one of the principal engines of growth. In the first place, capital goods production is one of the pillars of domestic manufacturing, and recent underinvestment will be reversed and contribute to growth for years to come. The average age of the U.S. automobile fleet is at record highs, and heavier transport and construction vehicles have not been replaced at a normal rate. The same observation holds true for factory capital equipment. One clear sign of underinvestment is that in 2009, for the first time since the Great Depression, the total capital stock in the United States declined when taking into account depreciation as well as new investment.