Sunday, October 11, 2009

The U.S.A. Is Still the World's Largest Manufacturer

The chart above shows manufacturing output of selected countries and the BRIC countries, as a share of world manufacturing output in 2007, using United Nations data via the BLS (I haven't been able yet to find comparable data for 2008). It's interesting that U.S. factories produced almost twice as much output in 2007 as China, and the U.S. produced an amount equivalent to the total manufacturing output of the four BRIC countries combined (Brazil, Russia, India and China).

As a
Cato Study concluded in 2007, "Reports of the death of U.S. manufacturing have been greatly exaggerated."

And as David Brooks wrote in 2008, "Instead of fleeing to Asia, U.S. manufacturing output is up over recent decades. As Thomas Duesterberg of Manufacturers Alliance/MAPI, a research firm, has pointed out, the U.S.’s share of global manufacturing output has actually increased slightly since 1980."

According to the Federal Reserve data, the U.S. produced almost $3 trillion of industrial output in 2008, measured in 2000 dollars (or about $3.7 trillion in 2008 dollars). In other words, if the U.S. manufacturing sector had been counted as a separate country, it would have been tied with Germany as the world's fourth largest economy, behind the U.S. (non-manufacturing), Japan, and China, and ahead of the entire economies of France, U.K., Italy and Russia (data here).

Bottom Line: The U.S. is still the world's largest manufacturer.

29 Comments:

At 10/11/2009 12:29 PM, Anonymous gettingrational said...

Global Insight has forecast that China will overtake the U.S. by 2012. Two years ago the forecast for China to pull ahead was 2020.
The study is based upon value-added which eliminates the double entry that U.S. GDP is based on and thus a more real figure is derived.

 
At 10/11/2009 1:49 PM, Blogger QT said...

gettingirrational,

I wonder what that says about Mr. Obama's handling of the economy and the escalation of deficits for years to come.

Mark,

Another interesting chart worth considering.

 
At 10/11/2009 1:55 PM, Blogger QT said...

2006 graphic representation comparing the relative size of the economies of China, Germany & Japan to the U.S. As one notes, China has a fair way to go to match let alone exceed the size of the American economy.

 
At 10/11/2009 2:37 PM, Anonymous Benny "Tell It LIke It Is Man" Cole said...

I see these reports from time to time, on US manufacturing is healthy etc.
Then I buy anything (except food, and that is heavily subsidized) and it is from offshore.
Okay, we make food, and products that are not practical to import, such as styrofoam cups.
Computers, cars, clothes--anything a consumer buys is made offshore, and I sadly confess, usually better.
I guess some bulky building materials and wood comes from the USA. Asphalt for roads, etc. At least for now.
China is roaring past the USA. They do not have a large parasitical military, nor do they spend hundreds of billions of dollars subsidizing a weakling rural communities.
They have a work ethic and strong culture. They are a mercantile nation, and that is supposed to retard their growth, but in the real world the opposite seems true.
With 1.2 billion people, China will easily eclipse us in a decade or two.
With our bloated military but crumbling infrastructure, the US looks more and more like a Third World banana-state, with a ferocious uniformed class, and cruddy services all around.
Go West young man--marry a Chinese girl and learn Mandarin. Or Thailand.
Obama-Bush--Maybe Obama is a better president, but he cannot effect a real energy or economic policy.
At least Obama shows up for work, and seems to have an earnest crew around him, such as Summers and Geithner. Even Volcker weighs in. It is a start.

 
At 10/11/2009 3:09 PM, Anonymous Iago said...

Benny, ever ride on an airplane? Lots of those are made in the USA. We make cars, motorcycles, watercraft, and helicopters too.

I suppose where you live there aren't too many American made combines, tractors or earth movers. I'm sure you've got cranes, backhoes, pile drivers and other construction equipment as American as apple pie.

We make tons of firearms, explosives, and other things that go bang.

Most of the medical equipment in your hospital is American made.

Lumber, paper, building materials, all home grown.

And then there's that wet smelly inflammable stuff you put in your car every week. That was manufactured here too.

Mark can show you the statistics on US manufacturing output and you still see only Made in China on the stuffed animals you sleep with.

 
At 10/11/2009 4:43 PM, Blogger Chuck said...

A much better view is the historical chart of US Manufacturing. The concern is that the direction is "downhill" not only due to cheap labor but from technology (robotics- Japanese are best at robotic technology). And lago needs to consider how much of our final manufactured (assembled items) have globally sourced components as in BOEING, GM, FORD, EXXON ("wet smelly inflammable stuff" was refined here mostly but we do import gasoline and other distillates , construction equipment as in KUBOTA a great American icon, lumber from Canada, paper and building materials from China (drywall, plywood and much much more), furniture from China.

 
At 10/11/2009 5:28 PM, Anonymous Anonymous said...

The point is well taken that automation has reduced the linkage between manufacturing employment and production. Just look at the size of employment in a number of industries. There is another revolution coming that will push this further the 3d printing revolution. Take the story in popular mechanics where Jay Leno uses a 3d printer to make parts for his old cars where regular parts are not available.
A place where automation has shown up allready is numerically controlled devices so that a lathe can make many copies identically.

 
At 10/11/2009 5:35 PM, Blogger PeakTrader said...

The U.S. share of world manufacturing has remained roughly constant for decades, although millions of U.S. manufacturing jobs were lost. I've stated before, the U.S. made up in value what it lost in volume, while the rest of the world had to make up in volume what it lost in value. The U.S. is most efficient at producing goods with market power.

U.S. living standards improved at a faster rate. U.S. houses are 50% larger than Western European houses, U.S. autos are larger, the U.S. has more home appliances, etc. In Europe, there are no Microsofts, Googles, Apples, Intels, Ciscos, Amgens, etc. Only one top ten biotech is in Europe, because it bought most of Genentech, a U.S. biotech. Roughly half of the world's 400 largest Information-Age firms are American.

 
At 10/11/2009 5:37 PM, Blogger QT said...

Lago,

There's another sector to ad to your list, pharmaceuticals. The U.S. is a world leader in this field.

Chuck,

Isn't what you are describing the process of sourcing raw materials and creating higher value finished goods?

By most estimates, China & India will surpass the U.S. sometime during this century. Trade and economic activity are not zero sum games...so the pie just gets bigger. This century will likely offer greater economic opportunity for mankind than at any time in history.

 
At 10/11/2009 5:55 PM, Blogger PeakTrader said...

QT, it's important to look at the real economy. The U.S. leads the world in the Agricultural-Industrial-Information-Biotech Revolutions. It's all interrelated. The U.S. produces more than enough food to feed the entire country with 2% of the workforce. Roughly 15% of the labor force works in manufacturing. The U.S. leads the rest of the world combined, in both revenues and profits, in the Information Revolution. The U.S. is way ahead in the Biotech Revolution.

Also, I've stated before: In 2007, U.S. per capita income was $45,000 and China's per capita income was $2,000. If the U.S. gains $700 and China gains $300 for each $1,000 in trade, then U.S. income rises less than 2% and China's income rises 15% (however, unfortunately for China, when social costs are included, the U.S. may capture all the gains in trade).

 
At 10/11/2009 8:02 PM, Anonymous John Papola said...

Great links, Mark. The cries of “America’s manufacturing base being hollowed out” are as baseless, flawed and ideologically driven as the howls over income inequality.

The notion that nations compete on trade and economics is false. China won’t “win” when they pass the aggregate US manufacturing output or GDP. We’ll ALL win by have an ever broader market of increasingly wealthy, smart and resourceful people applying their minds to the problems of our world.

All of us should HOPE that India and China “beat” the US. They have over 2 billion people between the two of them. Hoping anything otherwise is wishing poverty upon a third of earth.

What matters is not pointless statistics like the balance of trade, but the quality of our institutions. Rule of law and property rights have taken a beating during this crisis. If our political institutions continue along that path, there will be a flight of capital toward greener pastures at some point. When that happens, our balance of trade may even out… and we may be much poorer too.

As for robots taking over… what a great thing it will be when there are robots so cheap that they can replace even the cheapest labor. The entire human population will be so much better off.

The reality, though, is that there is a pretty huge supply of people on this planet who are ready and willing to work for much less than a robot would could. We’ll employ them either by overseas production or open borders or both. I say the more the better. Poor people deserve the opportunity.

 
At 10/11/2009 8:20 PM, Anonymous Steve said...

Would love to see the manufacturing base in the US expanding instead of contacting. The middle class needs manufacturing jobs to provide good wages without higher education.

 
At 10/11/2009 8:33 PM, Anonymous Anonymous said...

Steve,
Is that the future you wish for your children? 40 years on an assembly line putting nuts on bolts? I'm not implying that it's not honest work but I expect most people hope for something better for their offspring.

 
At 10/11/2009 8:42 PM, Blogger PeakTrader said...

I stated before, the best outcome for the U.S. is never exporting goods to foreigners in exchange for their exports. The U.S. is better off trading worth less paper assets for foreign goods.

The U.S. economy and stock market reflect two recent U.S. superbubbles. The first one was a higher level of both production and consumption from 1995-00. The second one was more of a consumption than production bubble from 2002-07. The third one should be more of a production than consumption bubble, including U.S. exports increasing faster than U.S. imports, to help correct global imbalances. Unfortunately, Obama stated we cannot afford more bubbles. Therefore slow growth policies have been enacted.

 
At 10/11/2009 9:33 PM, Blogger PeakTrader said...

I should add,...Therefore, slow growth policies have been enacted, while government spends more of your money.

 
At 10/11/2009 9:59 PM, Blogger QT said...

"...while government spends more of your money"

You got it. This administration is set to be the most profiligate in U.S. history.

In Canada, we went down this path and have been paying for it ever since. Ask yourself why we have waiting lines for medical treatment...the answer is Pierre Elliott Trudeau, an erudite, charismatic, charlatan. Ironically, the recipient of the Albert Einstein Peace Prize and an economic illiterate.

The U.S. now has a Trudeau. Enjoy the moment because you'll be paying for the privilege.

 
At 10/12/2009 6:12 AM, Blogger Chuck said...

QT
"Isn't what you are describing the process of sourcing raw materials and creating higher value finished goods?"

GM engine and transmissions are not raw materials. Most are made in Mexico and shipped to US assembly plants. Read a Maroni sticker on any GM car. It tells the import content.

It's not just raw materials. Machine shops and foundries can not compete on labor, environmental standards, government regulations, heath insurance and mind numbing paperwork to satisfy all of the local, state and federal bureacracies including taxes.

But the point that is still missing YA'LL is the decline of total $$$$ value of US manufacturing from US $$$$ content.

 
At 10/12/2009 7:01 AM, Blogger railrider said...

I wonder what the chart would have looked like 20 years ago and the trend line 20 years past until today.

 
At 10/12/2009 8:32 AM, Blogger Chuck said...

A GOOD LINK FROM THE FEDERAL RESERVE ON HISTORICAL DATA OF INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION

http://www.federalreserve.gov/releases/G17/Current/default.htm

 
At 10/12/2009 9:29 AM, Blogger Mr. Dart said...

Benny, good luck with that "marry a Chinese girl" plan. There aren't enough to go around due to years of sex selection via abortion. Estimates are that we will soon see at least 30 Million Chinese men reaching maturity with no female to marry. 30 Million. Never in world history has such a thing happened. There have been regions where, due to war, there were too few men. But never anything on the order of 30 million men in a nation reaching the age of marriage with no woman available.
So, better get a new plan, Ben. 30 Million Chinese men won't be happy with your poaching.

 
At 10/12/2009 9:37 AM, Anonymous gettingrational said...

Thank you to Chuck for posting Federal Reserve statistics although the link was not good. Here is link that shows on page A127 a chart where from 1999 to 2009 a fall in Industrial Capacity Utilization from 82% to 68%. This corresponds to a loss of 5.5 manufacturing jobs in the last 120 months for the U.S.!

 
At 10/12/2009 10:56 AM, Anonymous gettingrational said...

Update: that 5.5 U.S. job loss, for 1999 to 2009 has been revised to 5.5 million jobs lost -- oops on me.

 
At 10/12/2009 11:28 AM, Blogger ExtremeHobo said...

Keep in mind that manufacturing jobs lost does not necessarily equate to a diminished output. If you fire a man and replace him with a robot capable of 2x his output then your production has actually increased.

 
At 10/12/2009 12:06 PM, Anonymous Anonymous said...

"Is that the future you wish for your children? 40 years on an assembly line putting nuts on bolts? I'm not implying that it's not honest work but I expect most people hope for something better for their offspring."

Not really, however the future demographics of this country are not similar to my offspring. For the 50% of kids who won't be graduating from high school, yes I would rather have them in better paying manufacturing jobs putting on bolts than being unemployed. Men decreasing in labor participation. Lots of unemployed guys is not good.

http://www.bls.gov/opub/mlr/2006/10/art3full.pdf

Page 36, Table 1, column 4

 
At 10/12/2009 12:19 PM, Anonymous Benny The Man said...

Mr. Dart-
Yeah, I married Thai instead.
I think the future of Thailand is very bright, shipping goods and material the China, amd Japan, especially if the latter country opens up a bit.
One thing: My sister's husband teaches English to Chinese immigrants in the Bay Area--or used to. Not so many coming over anymore. There is more opportunity in China now, and so immigration has radically decreased.
What does that tell you?
I probably overstated the decline of US manufacturing. It is true, we have one major aircraft manufacturing company left (Boeing), but our automakers are all on life support. I expect medical equipment to offshore soon.
Due to having oceans on both sides, and the ever-crappy Mexico on the south, we will make some things here, due to shipping costs. Styrofoam cups are too bulky and low-value to ship, for example. Heavy bulky low-value goods.
Food and food processing, so heavily subsidized, will probably stay onshore. The food industry is completely subsidized, and will fight for every advantage in regulation. They have a strong lobby in the R-Party.
For some reason, our domestic manufacturing industry never sought the subsidy state that our farmers have won.
Long, long-term we may have a manufacturing revival in the United States, and even Michigan. Eventually, the dollar will sink in value, while factory space goes for cheap. Then foreign manufacturers, who may by then have a monopoly on manufacturing know-how, may open plants here, if their governments allow them too.

 
At 10/12/2009 12:46 PM, Anonymous Iago said...

Actually, Chuck, the plurality of the black gooey stuff we refine to make the smelly inflammable stuff is produced in the USA. We just happen to import a lot of it too.

But you miss the point. No country is blessed with all the inputs with which they could make manufactured outputs. It does not matter how much of 767 components are made elsewhere - we make the planes and there is value added from that manufacturing process. China imports a hell of a lot of oil, iron, and other raw materials and capital goods to make their manufactures. Are you going to subtract that from their production?

My point, which you missed, is that all this import export talk is nonsense. The US has an enormous GDP and standard of living. Whether we make it from goods, services, manufactures, raw materials, or intellectual capital is IRRELEVANT.

BTW, we get most of our lumber from Washington, Oregon, Montana and North Carolina.

And while not strictly considered "manufacturing", our agriculture production is enormous.

 
At 10/12/2009 4:24 PM, Blogger juandos said...

"The U.S.A. Is Still the World's Largest Manufacturer"...

Well how long will that last?

From Industry Week Oct. 6: New Report Says Rising Costs Imposed on Manufacturers Threaten Job Growth, Competitiveness

Non-production costs add almost 18% to U.S. manufacturers' costs relative to major trading partners

From the Heritage Foundation dated November 24, 2008: The True Costs of EPA Global Warming Regulation

by Ben Lieberman

Meanwhile, the Environmental Protection Agency (EPA), pursuant to a 2007 Supreme Court decision, has initiated steps toward bypassing the legislative process and regulating greenhouse gas emissions under the Clean Air Act.

See what happens when five liberal idiot lawyers are given free reign over the rest of the country...

 
At 10/13/2009 5:33 AM, Blogger PaulO said...

And while not strictly considered "manufacturing", our agriculture production is enormous.

Food manufacturing is considered a part of the manufacturing industry, and it is a significant portion:

"The food manufacturing industry is one of the United States’ largest manufacturing sectors, accounting for more than 10 percent of all manufacturing shipments."

http://www.trade.gov/td/ocg/report08_processedfoods.pdf

 
At 11/10/2009 2:52 PM, Anonymous Anonymous said...

I love it when the "Free Trade Away America" group comes up with such crapola. It is obvious that they are not nor have they ever been involved in manufacturing. Yeah, I guess the robots are all to blame for the loss of manufacturing. Really, is that what you believe. I guess that means that China makes everything with robots since every product seems to come from there. Keep believing this nonsense and get back to me when the USA is the newest member of the Third World. I would no sooner believe your statistics as I would believe that Democrats or Republicans are for working people.

 

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