The Exaggerated Rumor of Manufacturing's Death

Let's say your industry grew from annual sales of $1.4 trillion in 2000 to sales of $1.55 trillion in 2009, measured in constant dollars. That's not robust growth, but it's not decline. Would it surprise you to know that the field is the U.S. manufacturing industry? No? Then what if I told you that in 2007, before the recession, the same industry had sales of $1.7 trillion for a tidy 4-year growth rate of 21 percent?

That's the actual track record of the U.S. manufacturing industry, according to the Statistical Abstract of the United States. And U.S. factories are doing even better today, according to the Institute for Supply Management, which reported in March that its index hit its highest level in seven years.

None of this means that domestic manufacturing does not face pressure from within and without. But it does mean that if you are a small business owner who counts out domestic manufacturing as a source of customers, products and even a place to start a business, you are probably acting on the basis of bad information.

Of course, not all manufacturing sectors are equal. Some are better than others. Here are some of the best prospects for starting a business, selling to manufacturers, or sourcing from a domestic factory:

  • Aerospace. Aerospace, especially the civilian side, has suffered with other industries in the recession. What makes aerospace special, according to figures from the International Trade Administration is the import-export ratio. In first-quarter 2010, ITA figures show U.S. aerospace manufacturers exported $18.4 billion worth of goods, while importing $6 billion, for a positive balance of trade of $12.4 billion. China wasn't even a top five market. France, the UK, Japan, Germany and Canada accounted for nearly 38 percent of the total exports and 74 percent of imports.
  • Consumer goods. In this broad category from appliances and beverages to furniture and recreational equipment, U.S. manufacturers are holding their own. The ITA says musical instrument makers, for example, increased shipments from about $1.4 billion in 1997 to about $1.8 billion in 2000, where they stayed until the recession hit. In the half-trillion-dollar processed foods industry, U.S. manufacturers in 2008, the latest year for which ITA reports, exported $48.5 billion worth and imported $40 billion -- another trade surplus.
  • Medical devices. This is a middle-sized industry, with about $98 billion in annual sales, that in 2007 consisted of 5,300 companies, of which three quarters had fewer than 20 employees, per the ITA. U.S. medical device makers overall typically experience 6 percent annual growth, pay 15 percent more than the typical factory and hold a competitive advantage in related fields including microelectronics, instrumentation, biotechnology, and software.

While the U.S. has been and remains the world's largest producer of medical devices, U.S. factories overall no longer rule the world. This year, according to the Manufacturers Alliance/MAPI, the torch as top global manufacturer passed to China. That's a momentous event, surely, but it's worth noting that China, though producing slightly more than the U.S., has a population more than four times as large. U.S. manufacturers still produce twice as much as Japan, three times as much as Germany, and 10 times as much as India.

Your takeaway: U.S. manufacturing and manufacturers represent vibrant and viable customers, suppliers, and business opportunities for small business owners, no matter what you hear from the mouths of demagogues,

Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications long enough to lay somewhat legitimate claim to being The Article Authority. Follow him on Twitter @bizmyths.

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