So You Want to Encourage Manufacturing Investment in Your Area?

Here are some clips from a very informative article by Michael Evans about manufacturing investment. It appeared in the July 1 issue of Industry Week. This does NOT bode well for your plans to grow your local manufacturing sector!

"I suggest that at least some of the answer lies elsewhere -- in the data relating to manufacturing construction. Since 1980, manufacturing construction -- that is the building of new plants and the expansion of existing plants -- has fallen from 10% of total nonresidential construction to 2%. Relative to the index of manufacturing production, it has plunged from 0.8 to less than 0.1.

There have been two major periods of decline in these ratios: 1982 through 1985 and 1998 to the present. The earlier decline can easily be explained by extremely high real interest rates and an overvalued U.S. dollar. Yet during the past seven years, interest rates fluctuated in a range from fairly to remarkably low, and the U.S. dollar has generally been near or below its equilibrium value. Hence, there is no likelihood of a reversal of this declining trend such as the reversal that occurred in the late 1980s and early 1990s once interest rates and the dollar's value returned to normal levels. There is no mystery about what happened to manufacturing construction. It went overseas."