Manufacturing Added Less to Real GDP in the First Quarter Than in the Prior Two Quarters

As noted earlier, the U.S. economy grew by an annualized 1.1 percent in the first quarter, and the Bureau of Economic Analysis has now released data breaking out that growth by industry. In short, real value-added output in the manufacturing sector increased by 1.4 percent in the first quarter of 2016, slowing from 2.6 percent and 2.4 percent growth in the third and fourth quarters of 2015, respectively. As a result, manufacturers contributed 0.16 percentage points to headline growth in the first quarter, down from 0.31 percent and 0.29 percent in the prior two quarters.

Looking specifically at manufacturing in the first quarter, real value-added from nondurable goods firms rose 3.8 percent at the annual rate, but durable goods manufacturers saw output decline by 0.6 percent. Therefore, durable and nondurable goods businesses contributed -0.04 percent and 0.2 percent, respectively, to real GDP for the quarter.

Putting that figure in perspective, the largest contributors to real GDP growth in the first quarter were construction (0.36 percent), professional and business services (0.31 percent), health care and social assistance (0.28 percent) and retail trade (0.28 percent). In contrast, there were significant drags to growth from transportation and warehousing (-0.27 percent), mining (-0.15 percent) and utilities (-0.12 percent) in the first quarter.

Overall, manufacturing gross output declined from $5.868 trillion in the fourth quarter of 2015 to $5.760 trillion in the first quarter of 2016. Gross output from durable (down from $3.015 trillion to $2.994 trillion) and nondurable (down from $2.853 trillion to $2.766 trillion) goods manufacturers also declined. This was the second straight quarterly decline in gross output, off from $5.985 trillion in the third quarter of last year, and the data were down from an all-time of $6.284 trillion experienced in the third quarter of 2014.

Those findings closely mirror the value-added data for manufacturing, which declined from $2.179 trillion in the fourth quarter of 2015 to $2.159 trillion in the first quarter of 2016. Value-added eased for both durable (down from $1.188 trillion to $1.186 trillion) and nondurable (down from $0.992 trillion to $0.973 trillion) firms. Value-added in manufacturing peaked at $2.188 trillion in the third quarter of 2015.

The bottom line is that manufacturing accounted for 11.8 percent of real GDP in the first quarter of 2016, down from 12.1 percent and 12.0 percent in the prior two quarters, respectively.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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