America's ready to roll, again PDF Print E-mail
Saturday, 31 March 2012 07:59
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Q4 GDP up to 3 as the next phase of America’s re-industrialisation gains ground

The world’s largest chopsticks factory, BNP Paribas Securities India’s Gautam Mehta tells me over a pan-Asian meal at the Imperial Hotel’s Spice Route, is a US company based out of Georgia; the second-largest, he adds with a grin, is based out of China.

Yeah sure, I say, the Chinese are slipping up and the US is taking up the slack! Turns out Gautam is right, Georgia Chopsticks produces 2 million chopsticks a day and plans to go up to 10 million soon, making it one of the largest manufacturers in the world, if not the largest. But that’s something I figure out later, when I’m in the office sitting before Professor Google. Back then, I turn to Gautam’s senior colleague, very senior colleague, Richard Iley—Gautam’s an assistant VP in the India division while Richard is the managing director of BNP’s macro-economics research division for all of Asia.

Richard is quick to back his young colleague, but with a calendar that’s imaginatively called 2012: The year of the Draghi, a take-off needless to say on the fact that the world’s future is probably in the hands of Mario Draghi, the new head of the European Central Bank. The calendar has leaves on most important countries, but the ones we focus on are those on the US (three of the charts are reproduced in this piece). Chart 2, for instance, makes it clear that while US growth was going along with Europe’s for a long time, it has now decisively broken away.

While US GDP numbers just out tell you the same story (see Chart 1), the reason for this is the ability only the US seems to have to restructure really quickly, to take it squarely on the chin, close down factories, and move on. In January, McKinsey research pointed out that the US was restructuring the fastest in the world, and US households had probably another two years to go by when they’d be back to their pre-2000 levels of indebtedness (‘Long haul ahead for Europe’, http://bit.ly/HxWUau has the gist of the argument).

It could be the huge financial restructuring, or the sharp fall in the value of the dollar that caused US exports to boom, or the fact that the surge in shale gas has completely changed the US energy equation—Richard has a slide on how North Dakota oil production is up to around six times what it was in 2007 and one on how US and European energy prices now have a firm wedge between them that seems to be widening.

Whatever the reason, another slide (Chart 4) shows how labour costs in manufacturing have fallen 10% in the US between 2002 and 2010 while they have risen for most other developed countries (40% for Germany). Only Taiwan’s costs have fallen more than the US, by around double. As a result, manufacturing jobs in the US have grown by around 1.5-2%, the last time such growth was seen was in the late-1990s (Chart 3)—a total of 2.3 lakh manufacturing jobs have been added in the year to February. Richard points out this is the first time in nearly 30 years that manufacturing payrolls growth has been higher than for the rest of the economy—US re-industrialisation, he calls it.

At the beginning of what Fareed Zakaria called the post-American world where the dominant theme is the rise of the rest of the world and not so much about America’s decline, the country doing a good job of rising is … the US!


Last Updated ( Sunday, 01 April 2012 14:19 )

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