U.S. manufacturing still matters when evaluating the U.S. and global
economy. While manufacturing as a percent of the U.S. economy has
declined steadily since the end of World War II, its impact is greater than
its size. Manufacturing tends to be more cyclical than service activity, and it
remains a bellwether for the overall economy. S&P 500 Index companies are
heavily skewed toward manufacturing-related activity and changes in earnings
growth rates tend to track manufacturing activity. U.S. manufacturing has also
become increasingly focused on high-tech industries that invest heavily in
research and development. Finally, manufacturing still matters for the global
economy — manufacturing has shrunk as a percent of the U.S. economy for
decades, but the U.S. economy has also been growing over that period, helping
manufacturing expand over the last several decades [Figure 1]. To this day,
the U.S. remains the second largest manufacturer in the world. In this week’s
commentary, we take a look at recent data on U.S. manufacturing.
View the full weekly economic commentary here.
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