The Gross Domestic Product (GDP) data released today by the Department of Commerce contained mixed news for American manufacturers.
While real GDP increased 2.9 percent in 2010, more than half of that growth came from inventory accumulation. Real Final Sales (GDP net of inventory change) are a better indicator of underlying demand growth, increased only 1.4 percent. As U.S. manufacturing productivity grows about 3.8 percent a year, considerably faster growth in final sales is necessary for employment to increase.
The good news is that Real Final Sales grew at a stunning 7.1 percent annual rate in the fourth quarter of 2010 – the fastest rate since 1984 – and could provide a foundation for strong growth in 2011.
Durable goods sales rose 7.7 percent in 2010, and hit a blistering growth rate of 21.6 percent in the fourth quarter, equipment and software sales grew 15.1 percent in 2010 and real exports were up 14.6 percent – solid growth that, if continued, would put us on the path for job growth.
But while the latest news is encouraging we cannot take it for granted. We still need pro-manufacturing fiscal, trade, and other policies to ensure the growth continues.
This is the time for the Administration and the Congress to pay close attention to the NAM’s Manufacturing Strategy and the NAM’s Blueprint to Double Exports. If those recommendations are implemented, U.S. manufacturing – and the whole economy – would be on a path to creating jobs.
Frank Vargo is the NAM’s vice president for international economic affairs.
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