June 19, 2012

U.S. Suppliers Seen as Potential Beneficiary in Changing Manufacturing Environment, According to The Boston Company Asset Management

BNY Mellon Investment Manager Sees U.S. Industrial Distributors, Automation Companies Also Gaining

NEW YORK and LONDON, June 19, 2012 — The biggest potential beneficiaries from the anticipated resurgence of U.S. manufacturing include U.S.-based small and midsize industrial suppliers and distributors, according to a white paper from The Boston Company Asset Management, LLC, the Boston-based equity manager for BNY Mellon.

The white paper, Potential Beneficiaries of a U.S. Manufacturing Renaissance, concludes that a series of incremental changes over the past decade have allowed U.S. manufacturing to become more globally competitive.  These include:

  • A weakening dollar,
  • Narrowing wage differentials between the U.S. and other key manufacturing economies,
  • Declining natural gas prices in the U.S., and
  • Increasing costs and slower speeds of global supply chains.

"The significant decline in the dollar against other key currencies over the last 10 years has reduced the relative cost of U.S. wages," said Shirley E. Mills, vice president and senior research analyst for The Boston Company and the report's author.  "This is among the factors that have helped to drive down the labor costs in the U.S. versus many other countries, reducing corporations' incentives for sending production outside the U.S."

Labor has become an increasingly less important cost component of manufacturing, as automation has increased, the report said.  In addition, energy, another important production component, has become less expensive in the U.S. as natural gas prices continue to decline, making the U.S. more attractive to manufacturers, according to the report.

The Boston Company also cited the February 2012 rise in U.S. manufacturing payroll employment, which marked the first time that manufacturing employment grew faster than the non-manufacturing payroll since the 1980s, according to the report.  While large multinational companies are likely to allocate greater production to the U.S. because of these favorable trends, the smaller U.S.-based operations that supply these larger manufacturing complexes are likely to grow faster, the report said.

"We see the list of winners encompassing components suppliers, transportation companies and raw material producers," said Bart A. Grenier, chief executive officer and chief investment officer of The Boston Company.  "The most attractive beneficiaries may not be the most obvious.  In addition to the direct beneficiaries, we see benefits accruing to retailers, banks and others that serve regions where manufacturing activity increases."

The report notes that the shift toward higher U.S. manufacturing could stall for a number of reasons, such as a significant appreciation of the U.S. dollar or a lower differential between the price of natural gas in the U.S. and other manufacturing areas.  It also notes that the lower cost for natural gas could dampen the prospects of some U.S. industries such as the coal industry.

The Boston Company Asset Management, a BNY Mellon Investment Management boutique, provides investment management services for corporate, public, mutual funds and Taft-Hartley retirement plans, endowments and foundations.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.3 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $26.6 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com or follow us on Twitter@BNYMellon.

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