Euler Hermes
Economic Outlook n° 1187 | Special Report | The Reindustrialization of the United States
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▶ Further sector concentration of the U.S. manu- facturing landscape
Figure 7 shows industries plotted on the horizontal axis of growth in value added, versus the vertical axis of growth in total output, over the time period 2000- 2010. The strongest industries are seen in the upper right quadrant, with the computer and electronics industry the clear standout with real value added, growing +417% since 2000. The petroleum and coal industry was also a strong performer with other attractive industries including food and chemicals. In general, durable goods manufacturing, such as machinery and “other transportation” (excluding automotive), along with “miscellaneous others” per- formed quite well. The weaker industries are in the lower left quadrant and are dominated by lower value-added, mature businesses such as apparel, fur- niture, textiles, and wood. TableBsummarizes the most buoyant sectors for the period 2000-2010. A gap has widened between them and the lackluster group leading to a stronger concentration in U.S. manufacturing. The contribution of the top five sectors to U.S. manu- facturing value added has risen from 51% in 2000 to 59% in 2010.
▶ Further sector concentration of the U.S. manu- facturing landscape U.S. manufacturing has expanded along with the world market in terms of total sales, but has steadily lost market share of sales, contracting from 22% in 2000 to 17% in 2011(estimated). On the other hand, U.S. manufacturing has managed to preserve its
B. Breakdown of the manufacturing value added by Sector Ranking
2010
Ranking 2000
Sector
11 Computer and electronic product mfg 23 Chemical mfg
32 Food, beverage and tobacco product mfg 4 5
12 6
10
Petroleum and coal product mfg Machinery mfg
64 Fabricated metal product mfg 7
Miscellaneous mfg
10 11 12 13 14 15
16. 17 18 19
87 Other transportation equipment mfg 97 Plastics and rubber products mfg 9 5
Paper mfg Motor vehicle, body, trailer, and parts mfg
12 11 14 15 16 17 17 19
Electrical equipment, appliance and component mfg Primary metal mfg
Non metallic mineral product mfg Printing and related support activities Furniture and related product mfg Wood product mfg
Textile mills and textile product mills Apparel and leather and allied product mfg
Source: Bureau of Economic Analysis 12
position in global value added, with a market share sliding only slightly from 23% to 22% over the same period, increasing slightly in 2012. The data suggest two possible explanations. First, it could be that U.S. manufacturing has shifted toward higher value added activities and has deserted those manufacturing sub-industries with lower value added. This possibility corresponds with the notion that it has proven difficult for the U.S. to compete with low labor cost countries. For example, simple goods can be made in China much more cheaply than in the U.S., driving U.S. manufacturers out of those markets. The huge influx of simple, cheap Chi- nese goods is a perfect example of this phenomenon. Labor and capital displaced by lower cost goods will then be moved to higher value-added manufactu- ring. This condition is a perfect demonstration of the uncomfortable notion of “creative destruction” which is often very necessary for an economy to grow in the long run but which is so painful in the short run. In this case the data may actually indicate a positive phenomenon. A second explanation arises from the fact that the dif- ference between sales and value added can be thought of conceptually as a proxy for profit margin. Thus, the data might suggest that American manu- facturers are taking smaller profit margins in a global environment of slow growth and low inflation crea- ting very strong downward pricing pressures. This second explanation does not indicate a flaw in U.S. manufacturing, since manufacturers around the world have to contend with the same conditions.
Weight manufacturing value added in 2010
15.6% 13.3% 12.2% 10.1% 8.2% 7.1% 5.2% 4.2% 3.9% 3.3% 3.2% 2.6% 2.5% 2.1% 1.9% 1.7% 1.3% 0.9% 0.7%
7. Production and Value added index changes 2010/2000 (Real Terms) Output changes in %
20 40
-60
Manufacturing Primary metal Furniture
Textile -40 -20
-80 -60 -40 -20 0
Durable goods Fabricated metal product
Miscellaneous manufacturing Apparel
Petroleum and coal product Chemical Other transportation equip.
Computer and electronic product
0
20
40
Wood product Machinery
Non Durable goods Paper
Plastics and rubber Source: Bureau of Economic Analysis – Bureau of Labor Statistics
60
80
100 Value added changes in % - Index basis 100 = 2000
Nonmetallic mineral product Electrical equipment Food and beverage
Printing Motor vehicule
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