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Export revival boosts U.S. production; Helps create boom in manufacturing

Don't tell Michael W. McLanahan that manufacturing in the United States is dead. His family-owned, privately held company has made mineral processing and farm equipment since its founding way back in 1835 -- and is enjoying a boom.

"It was our best year ever," said McLanahan, during a tour of the factory in central Pennsylvania that illustrates why manufacturing is growing twice as fast as the broader economy.

McLanahan, 73, is the fifth generation of his family to run the capital-intensive company. It builds equipment to help mining companies separate product from waste, the dairy industry to remove manure from sand and the energy sector to segregate gravel from silica sand used in "fracking."

McLanahan Corp. boomed even as U.S. economy struggled to gain momentum in 2011 and the global economy was panicked and fearful that Europe's debt problems would drag everyone down. One important reason for McLanahan's success -- and for U.S. manufacturing's rising luster -- is an export revival.

The manufacturing sector as a whole bounced back in 2011, adding more than 287,000 new positions over the last 13 months and shifting into higher gear after a summer slowdown.

During 2011, exports of U.S. goods and services were up by 14.5 percent over 2010, to a record $2.1 trillion, the Commerce Department reported Friday. And despite Europe's economic problems, U.S. exports to Europe rose 3.6 percent in December.

Other data also signals a nationwide manufacturing rebound. December orders for durable goods -- big-ticket items such as cars, refrigerators and industrial equipment -- rose by a better-than-expected 3 percent. That was on top of November's upward revision to a 4.7 percent increase.

It's good news for a sector that accounts for about 12 percent of the U.S. economy but lost more than 6 million jobs over the past decade. There's even anecdotal evidence that some companies that had shifted production overseas are beginning to come home. Some orders for iron castings that McLanahan had lost to China are returning because of quality and supply issues.

How many firms are moving back? It's hard to know.

"It's a hard number to quantify -- the notion of outsourcing and insourcing. There's a hype to both of those numbers," said Chad Moutray, chief economist for the National Association of Manufacturers. "We have a lot of foreign companies that are locating here. It's a global decision-making process right now."

Right now many factors are combining to make American manufacturing more attractive than it's been in quite a while. These include rising production costs in China, flat wage growth in the United States, corporate borrowing rates near historic lows, a weakening of the dollar against the currencies of competitors in hot emerging economies and a boom in U.S. natural gas production that's lowering a key cost for U.S. factories.

"Labor cost is not the only factor that is under consideration when you are locating. Taxes, energy costs, the advantage of being closer to the customer," Moutray said. "A sea change in our thinking, at least globally, is that the U.S. is now on the map when it comes to these decisions."