Friday, May 2, 2008

Manufacturing value-added as a percentage of manufacturing output

I just ran some statistics from the BEA website to determine the relationship between value-added in the US manufacturing sector and output. The statistics on manufacturing output start in 1987, though the value-added statistics go back farther. Here is what I found:

The graph shows that value-added as a proportion of gross output remained fairly steady until 2002, but has been declining since 2002. In 2002, value-added was 35.2% of gross manufacturing output. In 2006 (the most recent year available) it was 31.4% of gross manufacturing output. This decline could reflect the increasing proportion of foreign made inputs in US manufacturing output or it could reflect higher prices for inputs.

The BEA defines value-added as:

Value added by industry is the contribution of indus­tries to the Nation’s output, or gross domestic product (GDP). An industry’s value added is equal to its gross output (which consists of sales or receipts and other operating income, commodity taxes, and inventory change) minus its intermediate inputs (which consist of energy, raw materials, semi-finished goods, and ser­vices that are purchased from domestic industries or from foreign sources). The three primary components of value added are an industry group’s return to do­mestic labor (compensation of employees), its net re­turn to government (taxes on production and imports less subsidies), and its return to domestic capital (gross operating surplus). This table presents value added by industry measured in prices of the period being observed.

And the BEA defines gross output:

Gross output consists of the goods and services pro­duced by an industry. Gross output is measured by summing the value of the industry’s sales or receipts, other operating income, commodity taxes, and inven­tory change; it is valued at producers’ prices (the prices received by the industry, including excise and sales taxes). Gross output is purchased by final consumers and by industries. Because gross output may be pro­duced and consumed as an intermediate input in the same year, aggregations of gross output across indus­tries reflect double-counting and exceed GDP. This table presents gross output by industry measured in prices of the period being observed.


No comments: