The Federal Reserve Board published a FEDS Note finding that physical goods remain a major force in the U.S. economy despite manufacturing’s declining employment share and broadly flat industrial production since the global financial crisis. A broader measure that captures value added to final goods across the supply chain has kept pace with overall GDP for more than a decade and accounts for about one-quarter of U.S. economic activity. Goods production also drives most cyclical fluctuations in GDP, with recessions almost uniformly reflecting contractions in goods and, to a lesser extent, structures rather than services. The analysis finds that stagnant headline industrial production masks divergent trends. Mining and energy materials have grown substantially, while durable goods output has been broadly stable and nondurable manufacturing has declined. Real value added in goods industries has also risen faster than gross output, potentially reflecting efficiency gains, shifts in industry composition or measurement problems. Goods GDP has outpaced traditional goods-industry value added since the mid-2000s, indicating that service activities such as design, transportation, distribution and retail account for a growing share of the value embedded in physical products.
Federal Reserve Board analysis finds goods production drives US business cycles and accounts for one-quarter of GDP
Federal Reserve Board analysis finds that goods production remains central to the U.S. economy, driving most business-cycle fluctuations and accounting for about one-quarter of GDP. Flat industrial production masks growth in mining and energy materials, while broader goods GDP captures rising value added from services across supply chains.