Academic journal article Monthly Labor Review

Goods Output versus Manufacturing Production

Academic journal article Monthly Labor Review

Goods Output versus Manufacturing Production

Article excerpt

"A curious phenomenon of the 2001 recession was the sharp divergence between two arguably similar economic indicators," opens Charles Steindel in Current Issues in Economics and Finance from the New York Federal Reserve Bank. He goes on to analyze the divergent patterns of the Federal Reserve Board's own figures on manufacturing production and goods output as measured by the Bureau of Economic Analysis.

Manufacturing production, a component of the broader industrial production index, declined by about 6-3/4 percent from June 2000 through December 2001. Over the next year and a half, there was very little growth in the index and it wasn't until the middle of 2003 that the series began to recover more strongly. In contrast, goods output, a component of the gross domestic product accounts, suffered only a mild decline in the recent recession and displayed what Steindel characterizes as "sustained growth afterward."

Steindel found that there was an underlying definitional difference between the two series that would be a key to understanding the difference in trends. The measure of goods output included the output of service sector firms that were involved in bringing the goods to market. This helps explain the long-term divergence of goods output and manufacturing production in terms of the role of services in the sale of goods. First, because imported goods typically require more services to bring to market, the growing significance of imports and the fact that the U. …

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