U.S. manufacturing remains the world’s largest manufacturer, despite an inaccurate report in today’s Financial Times that China has passed the United States. American manufacturing, in fact, is so large that if it were a self-standing economy, it would be the eighth largest in the world.
There are a number of errors in the data provided to the Financial Times by a private sector consultant. First, the report did not measure the physical quantity or volume of manufacturing, but rather measured current dollar output which is impractical due to price changes and exchange rate changes. Real Gross Domestic Product (GDP), and its manufacturing component, Real Manufacturing Value-Added, are the correct ways to measure economic output, because they are adjusted to remove the effect of price and exchange rate changes and measure real output.
The United Nations Statistics Division compiles global data on manufacturing value-added, and its most recent data shows the United States continues to lead, with close to 21 percent of all global manufacturing output in terms of constant dollars (real manufacturing value-added in 2009). China is the second largest, with about 15 percent of global manufacturing. No official data are available for 2010 yet, but given the gap between the top two manufacturers, China will not have surpassed the United States in 2010.
The second problem is that the consultant did not rely on official data in making its estimates. Rather than use the United Nations official data which is agreed upon by most economists as reliable, the consultant appears to have made its own assumptions. Using the consultant’s growth assumptions for China and the United States in 2010, and applying them to the official 2009 data shows that even in current dollars the United States remained the worlds’ largest manufacturer in 2010.
The U.S. Department of Commerce, which compiles the manufacturing value-added data, says that preliminary 2010 estimates will not be available until next month. In an effort to clarify the erroneous information provided to the Financial Times, the National Association of Manufacturers shared the data that shows the U.S. remains the world’s largest manufacturer.
Frank Vargo is the NAM vice president of international economic affairs.