China—a low-cost maker of goods—is falling behind in the global manufacturing race as rising wages and energy costs put pressure on the Asian country, synonymous with making super cheap stuff.
China is among several economies whose manufacturing price advantage over the U.S. is eroding, according to new data released Tuesday from The Boston Consulting Group. Other countries that are becoming less cost competitive include Brazil, Russia, the Czech Republic and Poland.
On the flip side, moderate wage growth and lower energy prices are making the U.S. and Mexico more desirable manufacturing destinations. The upshot? More U.S. businesses are likely to produce goods closer to home in the coming years.
"This means companies will start to move manufacturing out of those expensive countries if they can, to cheaper countries like the U.S.," said Hal Sirkin, a senior partner at The Boston Consulting Group.
Recent U.S. government data show similar gains. Industrial production increased 0.4 percent in July for its sixth-consecutive monthly gain, the Federal Reserve reported last week. Manufacturing output advanced 1 percent in July, its largest increase since February.
"It used to be a simple rule: Manufacturing is cheaper in Asia and South America," Sirkin said. "But it's fundamentally changed."