Value Added: Manufacturing

Think of it this way

It is the part of the economy that fits in a shipping container.

What is Value Added: Manufacturing?

What manufacturing contributes to GDP: making things, from steel and chemicals to aircraft and semiconductors.

How to read Value Added: Manufacturing

Its share has been falling for decades and is now smaller than that of professional services or trade. Falling as a share does not mean it produces less: US industry produces more than ever in volume, but the rest of the economy grew faster.

What Value Added: Manufacturing means for the market

It is the sector most sensitive to the global cycle and the exchange rate: it makes goods that can be imported, so it competes with the rest of the world in a way a hospital or a law firm does not.

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 Value Added: Manufacturing

Compare it with Finance. The distance between those two lines is the argument behind almost every conversation about deindustrialization.

It does not measure liquidity: it is the part of GDP produced by this sector.