While there are many reasons why U.S. businesses continue expanding to Mexico, there may soon be another to add to the list. According to The Week Magazine, a current event news site, the U.S. production sector is quickly growing as global demand increases. The ebbing of the Great Recession has increased demand for American-made products, yet producing goods in the U.S. remains expensive for companies looking to reduce manufacturing costs. With all of Mexico's production benefits and the need to supply the growing demand for American goods, more U.S. businesses may opt for offshoring their fabrication process to the country to keep operations high-quality while still taking advantage of Mexico's low-cost advantages.
Rising demand may encourage offshoring to Mexico
According to Reuters, U.S. manufacturing output saw overall moderate growth in August, but figures for new orders suggested more businesses will see growth in the months ahead. The U.S. Manufacturing Purchasing Managers Index kept by Markit, a financial data firm, saw August's reading fall to 53.1 compared to July's 53.7 reading. According to Reuters, any number over 50 shows expanding activity in the production sector.
Chris Williamson, chief economist for Markit, said U.S. manufacturers are about to experience a surge in demand, according to Reuters.
"At the same time [as new orders pick up], inventories of finished goods showed the largest fall since 2009 as some companies reported that demand often exceeded production," Williamson said. "Factories will need to ramp up production to replace depleted inventories given this order book growth."
Yet, manufacturing large qualities of goods in the U.S. can be costly for businesses. Despite strong gains in U.S. economic growth, many companies may be uneasy increasing their production in the U.S., as employing domestic labor and building new factories in the country can be expensive.
Mexico is quickly becoming the go-to destination for manufacturers to offshore their production process. The country has a highly-skilled workforce that is experienced in the manufacturing of quality goods and is less costly for companies to employ compared to the U.S. In fact, with a shorter supply chain than other offshoring countries and infrastructure improvements on the horizon, sending the production process to Mexico may be a cost-effective solution for businesses to meet the growing global demand for U.S. goods while still keeping expenses down.
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