Collaboration in Civic Spheres

Federal Reserve: mainly, we buy American

by Kyle Kim August 22nd, 2011

SUMMARY: China’s rising inflation and labor costs will have little effect in increasing American prices because, despite perceptions to the contrary, China has a small share of the U.S. consumer market, according to a recently-released economic report by the Federal Reserve Bank of San Francisco. Data from the report show that only 2.7 percent of American consumer spending is for “Made In China” goods and services versus 88.5 percent for U.S.-made items. Additionally, the majority of money that Americans spent on Chinese products went for U.S. marketing, transportation and sales of Chinese goods. As a percentage of 2010 U.S. Gross Domestic Product, U.S. spending on imports was only 16 percent, with China representing a 2.5 percent slice. The Federal Reserve Bank report says this suggests that “although globalization is widely recognized these days, the U.S. economy actually remains relatively closed.”

BACKGROUND: The report combined statistics from the Census Bureau 2011 U.S. International Trade Data, the Bureau of Labor Statistics’ 2010 input-output matrix, and personal consumption expenditures (PCE) by category from the U.S. national accounts of the Commerce Department’s Bureau of Economic Analysis.

KEY LINK: “The U.S. Content of ‘Made in China,’” Galina Hale and Bart Hobijn of the Economic Research Department of the Federal Reserve Bank of San Francisco, August 8, 2011.

KEY FINDINGS:

  • “Although globalization is widely recognized these days, the U.S. economy actually remains relatively closed. The vast majority of goods and services sold in the United States is produced here. In 2010, imports were about 16% of U.S. GDP. Imports from China amounted to 2.5% of GDP,” according to the report.
  • Another measure is the share of U.S. consumer spending on Chinese versus U.S. goods and services. Americans spent only 2.7 percent of their money on goods and services from “Made in China” labels in 2010. Comparatively, 88.5 percent of U.S. consumer spending in 2010 went toward American-made goods and services.
  • U.S. consumer spending on imports rose from 11.5 percent to 13.9 percent in 2010 with the inclusion of so-called “intermediate goods and services” used in U.S. domestic production. This includes imported oil used in U.S. production of gas, fuel oil and other energy goods, and in transportation.
  • The majority of the 2.7 percent share of U.S. consumer spending on Chinese products goes to promote the “Made in China” label. On average, 55 cents of every dollar spent on a “Made in China” product in the U.S. is actually for costs of transport, marketing and sales. With this ancillary spending subtracted, this translates into 1.2 percent of U.S. consumer spending for costs of actual Chinese imports in 2010. However, when the impact of intermediate goods and services sold from China to U.S. buyers is factored in, that percentage rises back up, to 1.9 percent of U.S. consumer spending for 2010.
  • Although Chinese manufacturers captured 20 percent of the U.S. market for household products in 2010, and a 35.6 percent share of consumer spending on clothing and shoes, China had no share of U.S. spending for housing, transportation and medical care, which made up 67 percent of U.S. consumption in 2010.
  • U.S. consumer spending on Chinese-made vs. American-made goods and services/Federal Reserve Bank of San Francisco


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