MT Magazine November/December 2025

NOVEMBER/DECEMBER 2025

FEATURE STORY

23

by 2030, the current high level of manufacturing activity is astonishing. Looking at the nominal value of U.S. gross domestic product (GDP) for manufacturing, output reached an all-time high in the third quarter of 2024. Since then, output declined slightly but quickly returned to an upward trend in the second quarter of 2025. Over time, however, the share of nominal GDP from manufacturing has declined in a near-linear fashion. A paper published in the spring of 2017 by YiLi Chien and Paul Morris of the Federal Reserve Bank of St. Louis also highlights this concerning trend. The authors entreat the reader to look at manufacturing as a percentage of real GDP, which takes into account the effects of inflation on prices over time. Chien and Morris find that “Manufacturing’s share of real GDP has been fairly constant since the 1940s, ranging from 11.3 percent to 13.6 percent.” The reason for this difference is that prices for manufacturing output grew a full percentage point slower than prices in the wider economy over the period studied. Productivity gains in manufacturing processes allowed these firms to increase output even amid the recent, unprecedented worker shortages. By updating this analysis with more current data, we find that manufacturing’s share has declined slightly from the 2017 levels found by Chien and Morris, hovering around 10% of real GDP since the first quarter of 2023. While this could be interpreted as stagnation in the manufacturing sector, the level of real GDP from manufacturing shows that output reached its highest level ever recorded in the second quarter of 2025. This upward trend in real manufacturing GDP, combined with its steady share, means that the growth of manufacturing output has roughly matched the overall economy’s growth since the beginning of 2023. Other measures of manufacturing activity tell a similar story. Since manufacturing employment peaked in June 1979, industrial production has doubled. Real value added by U.S. manufacturers reached its highest level in the second quarter of 2025. While current manufacturing output is at a historical high, the investments made today will determine the future competitiveness of U.S. manufacturing. The next chapter will be written by those who build yet-to-be-invented products and utilize processes that have yet to be tested.

Terraforming the Manufacturing Landscape Beginning in 2024, the Bureau of Economic Analysis (BEA) published statistics to measure the economic activity driven by research and development spending. In September 2025, the BEA published data on the economic impact of R&D spending dating back to 2012. From 2012 to 2023, the total impact of R&D spending from manufacturers nearly doubled from $110.3 billion to $208.9 billion. Unsurprisingly, a large portion of this came from computer and electronic product manufacturers as data centers and alternative forms of electrification came online.

While the absolute impact of manufacturing R&D has grown, the share of total R&D impact from manufacturing has declined from nearly 40% in 2012 to 32.6% in 2023, reflecting the growing impact of R&D funds from non-manufacturing sectors of the economy. Between 2012 and 2020, private R&D impact increased by approximately 64%, while the number of utility patents granted rose by 36%. The U.S. Patent and Trademark Office only has data available through 2020, but the lag between patents being granted and R&D translating into economic activity may have been exacerbated by the disruptions caused by the COVID-19 pandemic and ensuing recession.