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U.S. and Mexico Considered Low-Cost Manufacturing “Rising Stars”

Posted 9:15 PM by

According to a recent article in 
The Economist, “When cheap is not so cheap,” the U.S. and Mexico are becoming more price-competitive as global manufacturing options.

It’s no surprise that China, India, Taiwan and Indonesia remain among the predominant low-cost manufacturing hubs, which a study by the Boston Consulting Group (BCG) recently confirmed. However, the U.S. is gaining ground as a low-cost option due to relatively slow wage growth and low energy costs. (The energy cost advantage is particularly beneficial for U.S. glass and steel manufacturing.) Stemming from cheap natural gas, the study indicates that North America will enjoy this energy cost advantage for five to 10 years.

According to BCG, of the top 25 exporting countries in the world, only seven countries are cheaper than the U.S. for manufacturing goods. And our neighbor to the south, Mexico, is now estimated to have “lower average manufacturing costs than China” on a per unit basis.

As the manufacturing cost gap narrows between the predominant low-cost options and the U.S. and Mexico, qualitative factors like governmental corruption will weigh more heavily on a business’ location decision. This is good news for the U.S. where the risk of doing business remains very low.

About the Author
Jon Nix is a member of Katz, Sapper & Miller’s Audit and Assurance Services Department. Jon audits and reviews financial statements, and he advises clients on accounting, reporting, compliance and internal control matters. Connect with him on LinkedIn.

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