Export Growth Drives Increase in Factory Shipments

By February 3, 2011Economy

The Census Bureau’s release of Manufacturers’ Shipments data today confirmed earlier data that 2010 was a strong recovery year for manufactures.  Shipments (factory sales) in 2010 were $5.02 trillion, 9.0 percent higher than in 2009.  After a rapid start to the year, factory shipments stagnated from April-October, but then ended the year with strong increases in November and December (See graph below). 

The highly cyclical durable goods sector grew 7.3 percent in 2010, with particularly strong growth in shipments of iron and steel mill products, construction machinery, industrial machinery, and computers.  Non-durables shipments rose 10.5 percent, driven largely by the strength of the petroleum and coal products sector, which was up 27.5 percent.  Other non-durables grew 6.0 percent.

The 2010 surge in manufacturing sales was the highest growth rate since 2005, and comes on the heels of the 16 percent drop in 2009.  Despite the growth in 2010, Manufacturers’ Shipments are still $463 billion (8.4 percent) lower than in the record year of 2008.  If 2011 were to repeat the nine percent growth of 2010 that would bring factory sales back up to tie their previous record and set American factories on a new growth path.

Whether that will happen depends in large part on exports.  Manufacturers’ Shipments for exports grew 19 percent in 2010 – 2.7 times as fast as the 7 percent growth in shipments for the domestic market.  Manufactured goods exports, in fact, accounted for nearly 40 percent of the entire increase in Manufacturers’ Shipments last year. If factory jobs are to increase, manufacturing output must grow more rapidly than manufacturing productivity increases – and the mature domestic market generally does not support that kind of growth. 

This illustrates the urgency of additional steps to expand exports, most particularly the need to obtain more overseas market access to rapidly-growing advanced developing countries.  American manufacturing ran a trade surplus in 2010 with U.S. free trade partners – marking the third straight year of trade surplus in manufactures with our partners. 

Frank Vargo is the NAM vice president for international economic affairs.

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