The US has a robust manufacturing industry that when ranked globally, it falls in second place behind China. The manufacturing sector of the US has contributed immensely in the creation of employment opportunities wherein 2016 it employed 12.36 million people and the employment rate increased by 1.7% in 2017 (US Census Bureau, 2019). The report by North American Industry Classification System, US Census Bureau, (2019) further indicates that the manufacturing industry was not a significant contributor to the GDP as compared to the real estate or the finance and insurance sectors. Historically, the industry has been recuperating from the great recession of the 1990s and in 2018 reached an all-time peak.
Growth Rate and Size of the Manufacturing Industry
In the US, the manufacturing production accounts for 78% of the entire production. The industry is extensive as it covers output in the automotive and parts accounting for 6%, machinery which also accounts for 6%, electronic goods 6%, Tobacco and food 11%, and fabricated metal products at 6% (Apps.bea.gov, 2019). Other production areas include chemicals which account for 12% of the entire production; hence, growth in the production areas will reflect the manufacturing output.
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Inflation Rate and the Manufacturing Industry
Whether it is demand-pull inflation or cost-push inflation, the manufacturing industry is profoundly affected by the fluctuation in the inflation rates. Especially the cost-push boom, the cost of raw materials increases resulting in increased costs of production. The consumer price index is used to measure inflation rates by the bureau of labor statistics even though data on the employment rates can also be used for the same purpose. However, the consumer price index is more effective as a determinant of the inflation rates as it also measures the proficiency of the economic policies set by the government (Bls.gov, 2019). Therefore, inflation rates affect the manufacturing industry through increased costs of production that are caused by increased costs of raw material acquisition, transportation costs, wages, and the reduced spending habits by the consumers.
Trends in the Gross Domestic Product
The manufacturing though classified to have contributed less to the GDP but its contribution cannot be underestimated. The manufacturing sector is the foundation of economic growth since the production of the semiconductor, a very tiny product has led to the explosion in the technological market comprising of the computers, internet, and smartphones among others (O’Sullivan, 2019). Other sectors of the economy have been enabled to a great extent by the manufacture of several components that assist in the thriving of the industries.
The real estate contributed to 13% to the GDP, yet the industry depends on manufactured products for the houses to be complete. The same can be said of the health industry, which contributed 8% but depends on medication that is made among other health-industry produced merchandise ( Apps.bea.gov, 2019). Generally, the GDP has been on an increasing trend and reached a peak in 2018, as demonstrated by the chart below.
Future Performance of the Manufacturing Sector
The manufacturing industry will continue to grow as more businesses are adopting technology in the different stages of their operations. In 2018, the manufacturing sector experienced an extraordinary investment in the internet of things. Thus, manufacturers have been given several opportunities to shift from the traditional forms of production to digital operation. Furthermore, the growth of the gross private domestic investment is an indicator of the growth of the manufacturing sector as the demand for equipment increases. The data below from ( Apps.bea.gov, 2019) indicates the increased contribution of intellectual property and equipment to the gross domestic investment. The two components are directly dependent on manufacturing, which creates more opportunities for the industries to adapt to the unique manufacturing needs from these areas.
References
Apps.bea.gov. (2019). Notice. Retrieved June 1, 2019, from https://apps.bea.gov/iTable/iTable.cfm?ReqID=51&step=1
Bls.gov. (2019). Consumer Price Index. Retrieved June 1, 2019, from https://www.bls.gov/news.release/cpi.toc.htm
O’SULLIVAN, R. (2019, January 7). The future of the manufacturing industry: Technology trends for 2019 and beyond. Retrieved June 1, 2019, from https://www.manufacturingglobal.com/technology/future-manufacturing-industry-technology-trends-2019-and-beyond
US Census Bureau. (2019). 2012 Manufacturing (NAICS Sector 31-33). Retrieved June 1, 2019, from https://www.census.gov/data/tables/2012/econ/census/manufacturing-reports.html
