Construction GDP outpaces the averages, growing by 2%.
By Manuel Gutierrez, Consulting Economist to NKBA
Total gross output in the U.S. economy fell to $36.7 trillion last year, a 3.3% drop from 2019. Other than the 5.5% plunge in the 2009 recession (Figure 1), this is the largest decline since 2000. Last year’s shortfall was not unexpected, given the severe impact to most businesses from the pandemic shutdown. More surprising, given the circumstances, is that the decline wasn’t much larger.
For the private sector, which excludes government output, the drop is slightly larger, to $33.7 trillion, or 3.6% behind 2019.
Figure 1 shows that gross output growth each year between 2010 and 2019 exceeded the long-term average of 1.6%, highlighted by the gray dashed line.
Largest among all industries in volume of gross output generated is Finance & Insurance, shown in Figure 2. Included within this category is finance; businesses including banks, insurance, securities firms, fund trusts, and others. For last year, its output value was $7.5 trillion, or 20.4% of the total U.S. GDP.
This is followed by Manufacturing, which generated $5.9 trillion of output last year, 16.1% of the total.
The category most relevant to NKBA members, Construction, shows that it represents nearly 5% of total output, or $1.8 trillion (Figure 2).
The construction industry fluctuates widely over time and is extremely sensitive to economic recessions and expansions. During recessionary times, it tends to fall more dramatically and takes longer to recover than most other industries. In expansionary periods, it exceeds on the upside.
This is apparent in Figure 3, which tracks annual growth for construction since 2000. In 2009, at the bottom of the last recession, output fell by 13.2%, following sizable declines in the previous three years. At its nadir, construction industry output was 26% lower than its peak level in 2015.
Last year, construction output grew just 2%, slightly above the long-term average for all industries of 1.6%. This growth is wholly due to a substantial increase in the residential segment, since non-residential was unchanged. Since gross output data does not break down construction into subgroups, alternative data sources were employed to get more granular. One source is the “Value of Construction Put in Place” data, also issued by the Department of Commerce.
Last year, construction output grew just 2%, slightly above the long-term average for all industries of 1.6%. This growth is wholly due to a substantial increase in the residential segment, since non-residential was unchanged.
According to this data, residential construction rose last year by 12%, while non-residential was virtually flat at 0%, bringing the overall “construction put in place” increase at 4.8%. Although this is higher than the 2% growth in construction output shown in Figure 3, it is directionally similar, but will never be the same owing to the different methodology and definitions of each study.
Another sector of interest is Manufacturing, which, as indicated above, generated over 16% of the gross output last year. Figure 4 displays the contribution of the principal manufacturing sub-groups.
Total gross output for the sector was $5.9 trillion in 2020, down 3.4% from 2019, which was slightly worse than the overall decline of 3.3% for all industries.
Despite this drop, there were several industries within manufacturing that actually increased last year.
Computers & Electronics were up 4.1%, topping $401 billion in gross output. It represents 7% of all manufacturing.
Paper and Chemicals manufacturing were each up 3.3% for the year. Paper contributes just 3% to total manufacturing output, but the Chemical industry is the second largest in the manufacturing sector, generating 15% of total manufacturing output.
The largest component of this sector is the Food & Beverages industry, which accounted for 16% of total manufacturing, or $973 billion in output last year.
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