**U.S. and Europe Defy Expectations with Strong Manufacturing Investment
Contrary to the popular narrative of manufacturing industries in decline, particularly in the United States and Europe, recent data reveals a different story. Political leaders and the general public have voiced concerns about the outsourcing of manufacturing jobs, notably during Donald Trump's 2016 presidential campaign and echoed by figures such as Nikki Haley and Keir Starmer. Yet, a fresh report from Colliers underscores the resilience and attractiveness of the manufacturing sector in these regions, particularly in attracting foreign direct investment (FDI).
U.S. Manufacturing: A Beacon of Investment
Despite assumptions of waning interest, the U.S. manufacturing industry remains a formidable player in the global market. According to Colliers' 2023 report, the Inflation Reduction Act (IRA) has significantly boosted domestic and foreign investment, propelling the U.S. ahead of expectations. The report, leveraging fDi Intelligence data, highlights a 6% increase in job creation through FDI across all industry sectors in 2023, with investment spiking by 65% since 2019. Manufacturing emerges as the most attractive sector, drawing the largest volume of FDI due to competitive operating costs and incentives.
Asian investments, particularly from South Korea, demonstrate robust engagement with the U.S. manufacturing sector, signaling a vote of confidence in its sustainability and growth potential. Monty Turner, senior vice president at Colliers, attributes this trend to a strategic shift towards reshoring and friendshoring, motivated by the desire to regionalize supply chains.
IRA: Fueling U.S. Manufacturing Growth
The IRA has played a pivotal role in accelerating the reshoring trend, especially notable in sectors like semiconductors, solar, electric vehicles, and batteries. By incentivizing U.S. companies to reinvest domestically, the act is reshaping the global investment landscape, even as U.S. investment into Europe declines. The IRA's favorable conditions have spurred expansions across the U.S. manufacturing landscape, reinforcing the sector's importance as a backbone of economic stability.
Europe's Manufacturing Sector Sees Revival
Parallel to the U.S., Europe's manufacturing sector has witnessed a remarkable 33% growth in FDI in 2023, as companies nearshore operations amidst ongoing global supply chain frictions. This investment surge in manufacturing starkly contrasts with the challenges facing the European business services sector, which saw a significant decrease in FDI due to a global slowdown in the technology sector and early 2023's high interest rates.
Despite perceptions of manufacturing jobs shifting eastward, the reality is more nuanced. Elias van Herwaarden, head of location strategy for Colliers Occupiers Services EMEA, notes that manufacturing jobs created via FDI since 2019 have predominantly bolstered western and central Europe. This resilience underscores the critical role of manufacturing in fostering economic stability and growth.
Conclusion: A Bright Outlook for Manufacturing
The long-term perspective on manufacturing investment remains optimistic. Beyond the tangibility of job creation and capital investment, manufacturing sustains the broader economics of service industries. The U.S. and Europe showcase the enduring value and potential of the manufacturing sector to drive economic stability and growth, challenging the narrative of its decline. Manufacturing is far from extinct; it is evolving, thriving, and continues to be a vital pillar of the global economy.
Analyst comment
Positive news: U.S. and Europe defy expectations with strong manufacturing investment.
As an analyst, I predict that the manufacturing sector in the U.S. and Europe will experience continued growth and attract more foreign direct investment. The resilience and attractiveness of the sector, along with favorable conditions such as competitive operating costs and incentives, will contribute to economic stability and growth. The strategic shift towards reshoring and friendshoring will further strengthen the manufacturing landscape.
