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Sarora's avatar

At the 42-minute mark.

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Sarora's avatar

Yep, capital intensity of the manufacturing sector had barely budged and equipment input growth had receded since then. That's likely turning around now. The value of constriction put in place for manufacturing facilities is surging, lifting with it workers in construction of industrial buildings. Given the tight labor market and perhaps a scarcity of skilled workers, the capital intensity of manufacturing is likely to increase. That is closely related to productivity growth. The manufacturing sector had dragged productivity down over the last decade. That may change, perhaps raising potential GDP growth. It may be too early to call it a new steady state, but the Fed better pay attention and re-think its long-term assumptions of growth (and whether the economy is above or below potential). My worry is that too restrictive a monetary policy may nip this positive outlook for manufacturing in the bud. And my hope is that (although prices should matter to relocation decisions) some of this is semi-autonomous, driven by geopolitical reasons and the hard lessons businesses learnt from the supply chain snarls over the past few years. Fingers crossed.

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