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aluminum, CCP Virus, China, coronavirus, COVID 19, GDP, gross domestic product, inflation-adjusted growth, lockdowns, manufacturing, metals, metals tariffs, real GDP, real value-added, recession, steel, tariffs, Trade, trade war, Trump, value added, Wuhan virus, {What's Left of) Our Economy
As everyone knows, at least as of the final (for now) official third quarter growth figures just released, the entire U.S. economy remains in a severe recession thanks to the arrival of the CCP Virus and the subsequent tight curbs on business activity.
Less widely known: A separate set of official figures released along with yesterday’s government release on third quarter gross domestic product (GDP) shows that, by the measures most closely watched (i.e, inflation-adjusted), domestic manufacturing never suffered a recession by one crucial definition – a cumulative downturn lasting at least two quarters. And can it be mere coincidence that the entire time, President Trump’s sweeping and steep tariffs on hundreds of billions of dollars worth of Chinese goods, and of steel and aluminum from most major foreign producers, have remained in place?
Below are the growth (and contraction) figures for the entire U.S. economy and for the manufacturing sector for the entire CCP Virus period so far – the first quarter through the third quarter of this year. They come from the Commerce Department’s data on four measures of output tracked by the folks who look at “GDP by Industry” and consist of gross output both pre-inflation and adjusted for price changes, and value-added (a gauge of production that tries to remove the double-counting that results from gross output’s inclusion of both inputs for products and services and the final products and services themselves) in pre-inflation and price-adjusted terms. All the non-percentage numbers are in trillions of dollars at annual rates.
1Q 2Q 3Q 1Q-3Q
v/a whole economy: 21.5611 19.5201 21.1703 -1.81 percent
v/a manufacturing: 2.3643 2.0537 2.3291 -1.49 percent
real v/a whole economy 19.0108 17.3025 18.5965 -2.18 percent
real v/a manufacturing: 2.1999 1.9629 2.2132 +0.60 percent
gross output whole econ 37.8268 34.2600 36.9425 -2.34 percent
gross output mfg 6.1163 5.3334 6.0134 -1.68 percent
real g/o whole economy 34.2613 31.3989 33.4440 -2.39 percent
real g/o manufacturing 6.2038 5.6162 6.2089 +0.08 percent
Probably the most important of these results is real value-added, since its topline economy-wide numbers are identical to the inflation-adjusted GDP figures regarded as the most important measures of economic growth. And in real value-added terms, manufacturing output in the third quarter was actually slightly (0.60 percent) higher than in the first quarter. Manufacturing expansion has also taken place according to the real gross output figures, though it’s been marginal.
Also crucial to note although both pre-inflation measures show first-third quarter cumulative manufacturing downturns, they’ve been shallower in both cases than the economy-wide slumps.
It’s true that the virus and related shutdowns have more dramatically impacted the service sector when it comes to first-order effects – because so many service industries entail personal contact. But the case for the tariffs’ benefits for manufacturing looks compelling upon realizing that U.S. services companies are major customers of domestic manufacturers. So although the virus obviously crimped these markets, it seems that the tariffs preserved a good many of them by pricing out much Chinese and foreign metals competition.
One way to test this proposition, of course, would be for apparent President-elect Joe Biden to lift the levies while the pandemic keeps spreading. Unless powerful evidence comes in to the contrary, manufacturers, their employees, and indeed all Americans should be hoping this is a bet Biden won’t make.
RealityChek 