United States: Bifurcated revival with advanced sectors – ING

ING analysts James Knightley and Coco Zhang contend that the United States manufacturing sector is experiencing a resurgence after a prolonged period of stagnation. Catalysts for this revival include the resurgence of reshoring, advances in artificial intelligence, and increased defence spending. The analysts project US manufacturing volume growth to expand by 1.5-2% annually over the next three years, yet they highlight an emerging divergence between advanced, highly automated industries and traditional, labor-intensive sectors.

Recent indicators suggest genuine signs of revival, with the Institute for Supply Management (ISM) production index moving out of contraction territory and signaling robust growth ahead. Factors driving this turnaround include robust order books and strong demand for highly automated, high-value-added products, which are regarded as national champions by the government and can command higher wages in the US.

Industries such as pharmaceuticals, technology, transportation, aerospace, and electrical power are anticipated to continue growing robustly due to the emphasis on AI integration and productivity enhancements.

Conversely, lower value-added production, where labor costs constitute a larger portion of overall production costs, is expected to struggle and may require a "Made in America" premium to remain competitive. Heavy industry, such as steel manufacturing, falls in the middle, experiencing cost increases similar to those in other sectors.

The desirability of manufacturing in the US is bolstered by ongoing economic growth outpacing other major markets, with the US economy expanding at an average of 2.5% per year over the 2023-2026 period, compared to 0.9% in Europe.