Bloomberg News

Manufacturing Contributed Less to U.S. Growth Last Year

April 26, 2012

Factory production accounted for 0.5 percentage point of the 1.7 percent increase in gross domestic product  in 2011, the Commerce Department said  today in Washington. Photographer: Scott Eells/Bloomberg

Factory production accounted for 0.5 percentage point of the 1.7 percent increase in gross domestic product in 2011, the Commerce Department said today in Washington. Photographer: Scott Eells/Bloomberg

Manufacturing added less to U.S. economic growth last year than in 2010, indicating a pickup in the expansion depends more on bigger gains in the services industry.

Factory production accounted for 0.5 percentage point of the 1.7 percent increase in gross domestic product in 2011, the Commerce Department said today in Washington. A year earlier, manufacturing added 1.2 percentage points to economic growth of 3 percent.

“We definitely need the recovery to broaden,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “There are signs that manufacturing is starting to slow. We’re going to see manufacturing contribute less to growth this quarter.”

Makers of durable goods, such as automobiles, were still one of the biggest contributors to the expansion last year, adding 0.49 percentage point after 0.96 percentage point in 2010. Durable-goods manufacturing increased 7.9 percent in 2011 after a 17 percent jump the previous year. Fifteen of 22 industry groups added to growth, including professional, scientific and information services.

GDP, the value of all goods and services the nation produced, rose at a 2.5 percent annual rate in the first quarter after advancing 3 percent in the previous three months, according to the median forecast of economists surveyed by Bloomberg News before the Commerce Department’s quarterly figures tomorrow.

Factories may give way to service industries as a pillar of the expansion as a slowdown in global growth curbs exports.

Service Industries

Service industries outperformed factories during the first quarter, according to data from the Institute for Supply Management, based in Tempe, Arizona. The group’s manufacturing index averaged 53.3 in the first three months of the year, compared with 56.7 for the non-manufacturing gauge. Readings above 50 signal expansion.

Federal Reserve policy makers said yesterday at the conclusion of their two-day meeting that they expect the economy to expand gradually. The central bank “expects economic growth to remain moderate over coming quarters and then to pick up gradually,” the Federal Open Market Committee said in a statement.

The U.S. will expand 2.3 percent this year, according to the median estimate in a Bloomberg survey of economists April 6 to April 11.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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