The potential for supply chain disruption as a result of China dealing with the Coronavirus, and almost a complete shutdown of their manufacturing economy, is looming heavy upon Wall Street multinationals invested in China.

However, tangentially related, as a result of USMCA we are now seeing signs of shifted investment into North America and increases in forecasts for U.S. manufacturing.

(Via CNBC) […] Early in the week, New York’s Empire State Manufacturing Survey for general business conditions posted a reading of 12.9, up 8 points from January and its best level since May. New orders surged to 22.1, the highest since September 2017, and shipments rose to 18.9, the best since November 2018. On Thursday, the Philadelphia survey exploded 20 points higher to 36.7, the highest since February 2017. New orders hit their highest since May 2018. (more)

The Philadelphia FED tracks factory orders in eastern Pennsylvania, Southern New Jersey, and Delaware. New orders in that region soared far higher than all expectations, reflecting a strong consumer-driven economy with ongoing purchases of durable goods.

We have only touched the initial outer edges of impact from the USMCA and there’s no doubt we will see additional shifts in investment and growth in the North American production economy as a result of the new U.S, Mexico and Canada agreement.

One small example is Microsoft:

Microsoft to invest $1.1 billion in Mexico over next five years: CEO https://t.co/v764CEQYtH pic.twitter.com/6xMOF8LpSk — Reuters (@Reuters) February 20, 2020

Microsoft is investing in new data centers within Mexico which indicates they are anticipating to fill a need for clients who need expanded digital technology. CEO Nadella said the investment is “focused on expanding access to digital technology for people and organizations across the country”. Think of it like digital service infrastructure.

In the same way a construction firm would position itself for anticipated utility service needs and housing development within a community, Microsoft is positioning for needs in the digital and technology space. As much as companies need access to electricity, water, raw materials and a labor pool, they also need to be able to link into data networks.

These are the very first steps within a resurgence of north American investment. As we have noted over the past several years the benefits of producing products in Southeast Asia are much less than they were ten to twenty years ago.

President Trump’s focus on ‘America First’ incentives has lowered overall energy costs, decreased the cost of doing business, cut regulatory hurdles and completely reset the total cost of production. The U.S. is now competitive, and without transportation costs the total cost of durable good manufacturing in the U.S. is now the best bet.

Secure jobs, higher wages, low taxes and consumer confidence creates a domestic cycle of economic growth inside the U.S. A big jump in building permits and housing starts is an example of that strength.