Monday, October 24, 2011

It's Dark. Is Dawn Near?

Had a convo with a consultant friend this morning about whether there would be some deterioration, or deflation,  in salary incomes over the next few years.  I voted (halfheartedly) yes, he voted (halfheartedly) no.  Reason for the not-quite-convinced on both sides?  Lotta variables.  Product cycle, cost inputs in reg/tax/energy (and materials), but mostly product cycle--or 'dominance' if you like--which allows margin maintenance or enhancement.  A decent, not overwhelming, case can be made for either position.

Anyhoo, the case for non-deterioration is made by Ambrose-Pritchard.  We've mentioned a few times that the US is repossessing manufacturing from PRChina for a number of reasons; you'll find a lot of them here.

"Made in America, Again" - a report this month by Boston Consulting Group - said Chinese wage inflation running at 16pc a year for a decade has closed much of the cost gap. China is no longer the "default location" for cheap plants supplying the US.

A "tipping point" is near in computers, electrical equipment, machinery, autos and motor parts, plastics and rubber, fabricated metals, and even furniture.

"A surprising amount of work that rushed to China over the past decade could soon start to come back," said BCG's Harold Sirkin.

The gap in "productivity-adjusted wages" will narrow from 22pc of US levels in 2005 to 43pc (61pc for the US South) by 2015. Add in shipping costs, reliability woes, technology piracy, and the advantage shifts back to the US.  --AOSHQ quoting The Tablet

You could add "J-I-T indigestion" to that 'reliability woes', because if the shipment has a 33% fail-rate, you wait a VERY long time for a replacement shipment.

So.  If you like being a Contrarian, bet on the USA in the 5-10 year period.  Too bad that Obozo will miss it entirely, eh?

1 comment:

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