Gross Domestic Product by Industry

Think of it this way

It is looking at the same cake by its ingredients instead of by who gets each slice.

What is Gross Domestic Product by Industry?

The same total as the “By spending” version, broken down by industry. It is calculated by adding up the value added of the blocks published by the BEA —private goods, private services and government—, which is why the gray line matches GDP except for rounding. It starts in 2005 rather than 1947: that is where the quarterly series by industry begins.

How to read Gross Domestic Product by Industry

What you read here is the STRUCTURE of the economy, not its size. The question it answers is what the country produces, and the answer has been moving in the same direction for decades: less manufacturing and more services. Turn sectors on and off to compare two specific ones. The BEA publishes GDP by industry later than GDP by spending, so this version ends one quarter earlier and its figure looks smaller. They do not disagree: in the same quarter they match down to rounding.

What Gross Domestic Product by Industry means for the market

It helps you understand where growth comes from, not to trade. Its practical value is in dismantling two common misconceptions: that the stock market reflects the economy —Information weighs much more in the index than in GDP— and that the financial sector has swallowed the country, when well over half of that line is housing.

Where the money flows

GDP can be measured in three ways that give the SAME figure: by spending (who buys), by production (who makes it) and by income (who earns it). This version uses the second: the value added of each industry, which is what it produces minus what it bought from others to produce it. Subtracting those purchases is what avoids counting twice the steel that goes into a car. The “By spending” version of the same chart splits the total the other way, which is why none of its lines match these: they do not measure different things, they divide the same thing differently.

What to watch in Gross Domestic Product by Industry

Look at the SHARE of each line in the total, not its height. In current dollars they all rise, because prices rise; what is informative is which one grows faster than the whole. That is where the usual pattern shows: manufacturing loses ground and professional services gain it. And be wary of the idea that there are defensive sectors in the abstract. Health care grew 7% during the worst year of the financial crisis and was the sector that fell the most during the lockdown, 13%: the same sector, the most resilient in one crisis and the hardest hit in the other. What decides is not the sector, it is what is breaking. When the next downturn comes, look here at which ones give way first before assuming which ones will hold up.

It does not measure liquidity: it is the same GDP, broken down by who produces it rather than who buys it.