The devastation in Japan has taken the world by surprise, so much so that other stories got buried. For instance, The Financial Times reported that China has officially surpassed the U.S. as the global manufacturing leader, ending America’s 110-year reign. I wasn’t necessarily surprised that this happened - in fact, we’ve been hearing projections about this for years, but it’s still a tough pill to swallow.
Furthermore, where are the pundits and the politicians screaming about the end of days for the U.S. economy? While alarmists may be concerned about the future of the U.S. manufacturing sector, we have to remind ourselves that we are a service-based economy. China is in the throes of mass-industrialization, so yes, they will manufacture a lot of things (and we will continue to buy them).
I’m not saying that we should hand our manufacturing industry over to China. We still have industries that not only provide high-quality products for domestic and international consumption, but a significant number of Americans still support their families on manufacturing jobs. The Institute for Supply Management's Purchasing Managers Index (PMI) is a widely used gauge of U.S. manufacturing activity.
I used HiddenLevers’ Macro Trend Screener to see how some U.S. manufacturing companies stack up against this lever. It appears many more companies have netted positive growth from one year ago than not. And the rest of the companies aren’t just doing well, they’re doing grrrreaaaat! Three that stood out - Hypercom CP (HYC), a small cap, Trimas Corp (TRS), a mid cap, and Rockwell Automation (ROK), a large cap, have all increased their stock price significantly in a year:
Chart created using Hidden Levers app.
We’re still a strong manufacturing country. And with the continual weakening of the dollar, our manufactured products will only become more competitive. The U.S. economy has other components that will prevent us from falling flat on our faces. As long as we maintain our service sector superiority and maintain our strong manufacturing sector, we’ll be just fine. Yes, Americans are competitive, and we want to be No. 1 in everything, but I, for one, am willing to concede the manufacturing title to China. I mean, we still have Beyonce and Lady Gaga.