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US offers strong growth potential thanks to ‘manufacturing renaissance’, says Brown Advisory

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With many global manufacturers moving their manufacturing operations back to the US, the country offers investors strong and sustainable growth potential, according to Brown Advisory, who believes the US is in the early stages of a manufacturing renaissance.

Paul Chew, head of investments at Brown Advisory, says: “In our view, the emerging model is that of productive, automated operations that can produce high-value goods with a relatively small workforce and achieve lower logistics and production costs due to falling domestic energy prices.” 
 
In the last two years, many global manufacturers have re-shored to the US, taking advantage of the dollar’s weakness relative to the euro and the yuan, competitively priced real estate in rural areas (compared to coastal China), and labour and energy costs. Among the biggest names to have announced that they will move operations to the U.S. are GE, Dow Chemicals, Caterpillar, Ford, Airbus, and Electrolux.
 
Brown Advisory believes this trend has powerful long-term implications for the economy, which supports its current emphasis on investing in US equities.  It is also expected that, in time, this renaissance will have a positive impact on the US jobs market.  According to Boston Consulting Group, a “multiplier effect” means each new manufacturing job creates between 2.5 and 3.5 new positions in construction, retail and other industries and forecasts 1.8 to 2.8 million jobs could be created over the next decade.
 
Chew says: “Numerous companies are returning to the US to take advantage of processes that get products to market faster and respond rapidly to customer orders. While the leading emerging market economies have made great strides in labour productivity in the last decade, they are still far behind the US which has managed to grow productivity at a faster clip than other leading industrialised nations, from a significantly larger base figure.”

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