Study says reshoring impact doesn't match hype

While reshoring of manufacturing from low-cost Asian countries has given a boost to U.S. manufacturers, it may be as much hype as reality, as imports from the region are still growing faster than U.S. production, a new study finds.

The study from management consultants A.T. Kearney noted that U.S. manufacturing production grew 6 percent a year from 2009 to 2013. But it also said that imported manufactured goods from Asia grew even faster, at 8 percent a year, during the same time frame.

“While the so-called reshoring trend has helped improve the mood of U.S. manufacturing since the Recession, the reality is that the import value of manufactured goods into the U.S. from 14 low-cost Asian countries has grown at an average of 8 percent per year in the last five years,” said study co-author and A.T. Kearney principal Pramod Gupta.

The study acknowledged limits in hard data on the topic, and did not look at Mexico as a reshoring destination, but it said that “the impact of reshoring on this turnaround [in U.S. manufacturing] is much less than the hype would indicate. Thus far the evidence has been largely anecdotal.”

The Dec. 15 study said reshoring is clearly happening, as manufacturers seek to mitigate rising costs in China, or they want more nimble responses from their supply chains, or they want to take advantage of more consumer interest in a “Made in the USA” label.

The study unveiled in A.T. Kearney's “Reshoring Index,” is what it said would be the first in a series of studies trying to look more objectively at the return of manufacturing to the U.S.

The A.T. Kearney analysts pointed to some industries, like apparel, where they admitted they were somewhat surprised that work was returning to the United States.

But in general, the study said it found little evidence to support the idea of large-scale reshoring — it said that in nine of the last 10 years, imports of manufactured goods grew faster than domestic manufacturing production.

It said that in the three years from 2011 to 2013, there was some evidence that U.S. manufacturing output was beginning to grow faster than imports. But it said early evidence in its index for 2014 show imports gaining ground again.

“This could be an indication that the impact of the reshoring wave is waning,” it said.

Plastics and rubber products manufacturing had the sixth-highest number of examples of manufacturing returning to the U.S., accounting for 7 percent of the more than 700 specific cases in A.T. Kearney's reshoring database.

The two biggest industries in the database were electrical equipment and components, and transportation equipment, each accounting for 15 percent of the total.

Plastics products manufacturing also had a relatively low ratio of manufacturing imports to domestic production, with imports from the 14 Asian countries equal to only 8.8 percent of the domestic production in 2012. That could suggest less off-shoring to begin with.

By comparison, in the electronics industry, imports from low-cost Asia were equal to 58 percent of domestic production in 2012.

And in the appliance industry, those Asian imports made up 28 percent of the value of domestic production.

Of course, plastics components are also contained within those larger products, like computers and washing machines, which may mean the 8.8 percent figure for plastics could understate the impact on the industry.

The study did leave one hint that the electronics sector may see more reshoring—it said that import growth of electronics components from Asia slowed markedly in 2013, after strong growth from 2009 to 2012.

“With year-over-year offshore import value growth slowing for electronics to a relatively modest 1.9 percent in 2013, are we now at a tipping point?” it asked. “We will leave that for the time being to the prognosticators.”