Commentary
As American firms rethink their sourcing in China, some, it seems, have decided to bring their operations home.
In 2022 and so far this year, investment in domestic U.S. manufacturing has risen smartly. Some of this spending aims to take advantage of federal largess, subsidies, and tax advantages for domestic chip making, electric vehicles (EVs), and the like. But the trend also seems to have support from other, more durable economic fundamentals. The recovery, however, is much more about capacity and output than about employment.
Last year, the Commerce Department reported spending on new manufacturing capacity equaled some $108 billion, up 12.5 percent from 2021. Only two months’ data are available in 2023, but they show a marked acceleration from last year’s growth pace. February spending is already 8.2 percent over last December’s. Overall manufacturing capacity has risen only a modest 1.4 percent over the last 12 months, but that is only reasonable since even a bumper year of new investment does little to alter overall capacities built up over the years. The trend nonetheless is encouraging, showing capacity growth after more than 10 years of decline between 2007 and 2020….