The strongUstrong.S. Manufacturing Recovery Uptick or Renaissance.pdfVIP

WP/ 14/28 The U.S. Manufacturing Recovery: Uptick or Renaissance? Oya Celasun, Gabriel Di Bella, Tim Mahedy and Chris Papageorgiou © 2014 International Monetary Fund WP/ 14/28 IMF Working Paper Western Hemisphere Department The U.S. Manufacturing Recovery: Uptick or Renaissance? Prepared by Oya Celasun, Gabriel Di Bella, Tim Mahedy and Chris Papageorgiou1 Authorized for distribution by Roberto Cardarelli February 2014 This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Abstract The notable rebound of U.S. manufacturing activity following the Great Recession has raised the question of whether the sector might be experiencing a renaissance. Using panel regressions, we find that a depreciating real exchange rate, an increasing spread in natural gas prices between the United States and other G-7 countries, and in particular decreasing unit labor costs have had a positive impact on U.S. manufacturing production. While we find it unlikely for manufacturing to become a main engine of growth in the United States, we find that U.S. manufacturing exports could provide nonnegligible growth opportunities going forward. JEL Classification Numbers: E22, L60, O14. 1 The paper has benefited from discussions with