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Made in China only 4pc cheaper than made in US: Oxford Economics report

US manufacturing is benefiting from the world's strongest rate of productivity, a flexible labour market, cheap energy and from having a big domestic market, according to a new research by Oxford Economics, which found that the US manufacturing sector remains a world leader.

"Although US manufacturing is facing meaningful headwinds from a stronger dollar and the collapse in investment in the shale energy sector, it remains the most competitive worldwide," analysts Gregory Daco and Jeremy Leonard, according to Bloomberg.

Manufacturing output per employee in the US rose around 40 per cent from 2003 to 2016 compared with 25 per cent growth in Germany and 30 per cent growth in the UK. While productivity has doubled in India and China, the US remains 80 per cent to 90 per cent more productive.

It's that robust productivity that has helped the US keep down the unit cost of labour or wages in relation to worker output.

"Since wage growth in China has largely outpaced productivity growth, and the renminbi has strengthened, China's unit labour costs are now only four per cent lower than in the US," the analysts said.

However, productivity growth throughout the US economy as a whole has been meagre in recent years, partly dragged down by the burgeoning, albeit inefficient, health-care sector. And the US continues to run a trade deficit with China.

There are other risks ahead. If the US dollar starts to rally again, that would spell danger for exporters.

"Another 20 per cent appreciation of the dollar," the analysts wrote, "would certainly dent US competitiveness, and once again make China an attractive production hub, as well as giving Japanese manufacturers a significant advantage."