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Rising pension, healthcare and energy costs are pinching US manufacturing profits and holding back vital hiring and investment, according to an industry study released on October 11.
Its findings send a warning to policy-makers, who are worried about sluggish capital expenditure and are anxious for it to improve to provide a safety net for the US economy in case consumers slow their spending.
The study from the Manufacturing Institute and the Manufacturers Alliance/MAPI found profits were 67 percent lower in five key US industries than would have been the case if not for these costs. It also cited the impact of global competition. "These structural costs have changed the dynamics of American manufacturing," said Jerry Jasinowski, president of the Manufacturing Institute. "These costs are generally greater than our competitors'," he told a news conference.
US corporate profits have surged since a recession in 2001. But the bonanza has not been equally shared, with the motor vehicle, fabricated metals, machinery, electrical equipment and chemical industries all badly lagging. These sectors account for almost 50 percent of US manufacturing, or around a quarter of the growth in the US economy, and are important for continued prosperity.
Robust spending by US households has been powering the US economy. But consumers are being squeezed by soaring gasoline and heating oil prices, as well as the fear that the country's rampant housing market may be cooling off.

Copyright Reuters, 2005

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