Facts About
Modern Manufacturing
The Trend in Spending on Goods Depends on the Measure
GDP is the sum of final expenditure in an economy. These final expenditures are classified into three major types of products—goods, services, and structures. Examining the trend in the share of goods expenditures in total economy-wide spending helps gauge trends in the purchasing of manufactured goods.
It is important to note that there is a difference between expenditures on goods and manufacturing sales in the United States; the measures are related but not the same. Expenditures for goods are greater than the manufacturing value because expenditures include transportation, wholesale, and retail margins that get the goods into the hands of consumers, businesses, governments, and foreigners (via exports). Manufacturing sales are primarily just business-to-business transactions.
The trend in goods expenditures as a percent of GDP depends on whether the spending is measured in current dollars or adjusted for inflation. A completely different direction in the trend is due to the unique quality adjustment and sharply falling prices for computer and electronic products. In current dollars, the ratio of goods to GDP fell from 40% in 1977 to 31% in 2013. In other words, the economy’s dollar outlays are moving toward service purchases. When adjusted for inflation (particularly the plummeting prices of computer and electronic products due to a processing speed quality adjustment), however, the quantity of goods increases over time. Inflation-adjusted spending on goods rose from 23% of GDP in 1977 to 32% in 2013.