Gross domestic product (“GDP”) is a key economic metric. In recent years, the makeup of GDP by industry in the United States has changed. GDP in the manufacturing industry, in particular, has recently made headlines.
Revenues within the manufacturing sector in the United States are expected to decline over the next several years. According to a recent study by Industry Week, in the second quarter of 2019, the manufacturing sector made up approximately 11% of total GDP and has hit a recession. The manufacturing sector’s percentage share of United States GDP in 2019 is one of the smallest it has ever been going back to 1947. This can partly be attributable to the ongoing trade war between the United States and China.
One important factor in the decline relates to the consumption of goods versus services. A recent study by PBS suggests that businesses in the United States are now more concentrated on the delivery of services as opposed to the selling of goods. Historically, the ratio of goods and services in terms of GDP has been 50% goods and 50% services. However, more recently, the ratio has shifted and now services account for approximately 60%. As a result, it has led to an overall decline in manufacturing jobs in the United States.
Declining revenues in the manufacturing sector causes some concerns for the United States economy. Many economists believe that the decline could also have a type of domino effect on similar industries. In addition, economists also believe that the decline relates to the manufacturing industry not keeping up with new technologies, which therefore suggests that the United States may be falling behind other countries.
Despite the present challenges and uncertainty, manufacturers have already begun preparing for changes in technology in order to keep up with current industry trends. Being proactive in keeping up with changes in today’s economy will allow manufacturing companies to thrive in a competitive environment.
