Leading U.S. manufacturing indices suggested modest expansion in business activity in December 2012. The Purchasing Manager Index (PMI), New Orders Index, Production Index and Employment Index all registered above 50% in December 2012. Of note, the New Order Index remained at 50.3%, indicating growth in new orders for the fourth consecutive month.
The Chinese PMI rose to a 19-month high of 51.5 in December 2012, reflecting continued expansion in China’s manufacturing sector.
In a recent publication “The U.S. Manufacturing Renaissance”, the Boston Consulting Group estimated that re-shoring – the movement of production to the U.S. by European and Japanese companies – and higher exports could create 2.5 – 5.0 million U.S. manufacturing and service jobs by the end of the decade. The impetus for re-shoring is being driven by several factors:
› Higher wage rates in foreign manufacturing venues
› Reduced transportation and carrying costs
› Faster response to changes in demand
› Better protection for intellectual property
Tax Law Provisions
The American Taxpayer Relief Act, which was signed into law on January 2, 2013 to avert the so-called “fiscal cliff”, extends 50% bonus depreciation through 2013. Some transportation and longer period production property is eligible for 50% bonus depreciation through 2014. Also, the top tax rate on capital gains and dividends was raised to 20% for taxpayers with incomes over $400,000 (single person) or $450,000 (joint filers). The maximum 15% rate was retained for all other taxpayers.