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Menzie Chinn has a collection of useful charts at Econbrowser illustrating the state of manufacturing in the US. Here's one, showing "cumulative changes in real exports vis a vis 2009Q2." Chinn writes: Clearly, export growth is decelerating -- not surprising given the collapse in trade volumes that took place during the great recession. Nonetheless, I find it interesting how much capital goods exports have increased. Now, as I mentioned in an earlier post, vertical specialization means that it’s unclear how much value added is incorporated in particularly the goods exports. Still, I think there is evidence for a manufactured exports rebound. Finally, there has been substantial skepticism that manufacturing employment will rebound strongly, even if the President’s initiatives outlined in the State of the Union are implemented. [4] I think that skepticism is largely warranted, given rapid productivity growth in that sector. However, that doesn’t mean that manufacturing value added won’t necessarily rebound. BEA only released data up to 2010 last month, so one can’t be sure. So while we have seen some marked improvement in U.S. exports and a a trimming of the trade imbalance, the question remains whether we will see sustained growth, and the sort of recovery-driving rebound of the manufacturing sector that President Obama has been calling for. Read Net Exports, Exports, Real Exchange Rates and Manufacturing here .

Here is a new video from the World Economic Forum on the future of manufacturing. While it comes across as a bit earnest in parts, we are sharing it here because it does a nice job of explaining how manufacturing--"advanced manufacturing" in particular--drives global economic growth. What is your take? Do policymakers need to work harder to drive advanced manufacturing in their economies? Can developed economies like the US compete with the new manufacturing juggernauts like Brazil and China?

Retailers in the US are relying on consumers spending and spending for the holidays, but the consumers that truly matter in the global economy are in China. The Chinese government has set consumption as a priority. This will require that Chinese consumers have more money and are confident in their family's economic situation. According to McKinsey's 2011 Annual Chinese Consumer Study , these conditions have been met. Take a look at the rise in confidence among Chinese consumers: The authors point out that spending will almost certainly rise along with that confidence. But sustained growth in consumption will depend more and more on Chinese consumers buying goods to replace products that they have bought in the past. This is behavior that we take for granted among consumers in developed economies like the US and Japan. But it is new ground in a lot of product sectors in China: A few categories, in particular big-ticket items such as cars, have significant growth potential through first-time buying. For example, China is the world’s largest auto market, with 11.7 million passenger cars sold in 2010 compared with 9.8 million in the United States. But the total number of cars sold per capita is 13 times smaller than in the United States, and most car buyers in China are still first-time buyers. Personal computers constitute another category still ripe for strong growth from first-time buyers. Ownership has risen sharply from 25 percent of urban households in 2006 to 44 percent today with much room for additional growth from new users. In poorer rural areas, only ten personal computers are shared among 100 households. As incomes continue to rise in China, and as the government’s consumption-boosting measures kick in, more and more people will be able to afford such items. For many categories that have been in China for more than ten years, however, and are widely affordable albeit at different price points, the headroom for growth from first-time buyers is limited. With the exception of very big-ticket and luxury items, as well as products that are relatively new to the Chinese such as breakfast cereals, many of the largest categories such as white goods, personal care, food and beverages, and apparel have now reached penetration levels of well over 50 percent of the urban population. This means that some categories may see falling growth rates. National sales of mobile handsets, for example, grew at around 7 percent a year between 2006 and 2010, compared with 21 percent during the previous five years, a reflection of the fact that 97 percent of urban households now own a mobile phone. In such cases, an essential component of capturing rising spending power will be to persuade consumers to buy more of the same thing—either by making more frequent purchases or buying in greater quantities—or to trade up to more expensive products in the same category. Refrigerators and washing machines serve as an example. Although over 90 percent of urban dwellers now own these items, the survey shows that the average time they keep either item before replacing it has dropped in the past two years from around seven years to six. In addition, the average amount spent has risen by 9 percent for refrigerators and 15 percent for washing machines. The survey again highlights how the importance of these other drivers of category growth differs both by category and region. Read the full report here .

As much as the US economy is struggling, exports have been strong ever since the recession ended. According to Jay C. Shambaugh , of the McDonough School of Business at Georgetown, exports have risen 23% since the end of the recession. This is easily explained by the weakness of the dollar, right? The costs for US goods abroad have decreased along with the strength of the US economy. Not so fast, says Shambaugh. Writing at Econbrowser , he points out that the patterns of where exports have risen do not match the dollar's relative decline: The takeaway for Shambaugh seems to be that, while exports can not serve as the fix for the US economy's problems, their relative strength is a sign that the foundation might not be as cracked as some suggest: The ability of U.S. firms to increase production and sell to markets where demand is growing is just more evidence that the U.S. economy is not fundamentally flawed or broken. Firms can find workers and increase output where they have customers. Yet while exports to growing foreign markets have been soaring, at home, residential construction has collapsed, structures investment by firms has collapsed, and state and local government spending has declined. All of these are a serious brake on demand. Compounding all this is the fact that real Federal Government consumption expenditures and gross investment in the third quarter was 2% below that of a year ago. This acts as a further brake on growth in output and employment. Some businesses may complain about fear of regulation (though in surveys their number one complaint is lack of customers) and some commentators may worry about structural unemployment and a lack of appropriate skills amongst the U.S. work force. There is plenty of reason to always make sure that supply side policies are sensible and worker training and education is adequate. But these do not seem to be the problems of today. Based on exports, the evidence shows that where there is demand for their products, American firms are more than ready to produce and to sell. Read What can exports tell us about the economy? here .

The US Senate sent a message last week, voting to enact measures against China for that country's currency "manipulation." It is unlikely that the House will go along with the Senate, so what we have is more gamesmanship than actual policy . But it does bring the issue of China's currency policies back to the fore. Kenneth Lieberthal , director of the John L. Thornton China Center at Brookings , argues that both the US and China need to resolve the problem of currency manipulation, as both economies depend on a strong relationship in order to grow:

Scotch as an economic indicator? The high priced whiskey has had a very strong year. The Guardian 's Severin Carrell reports that revenue from exports of Scotch were up more than 20 percent during the first half of this year. That is more than a little pleasing to the Scottish government as it has set some very ambitious growth targets over the next few years--50% growth in exports by 2017, according to the Guardian. But what we find striking is where the growth is: Foreign shipments of blended and malt whisky were worth £1.8bn, compared with £1.47bn in the first half of 2010, despite the global economic downturn, the relative high cost of whisky and depressed overseas sales by other British exporters. The Scotch Whisky Association (SWA) said that the strongest sales increases were in Asia, rising by 33% to £423m, and in Central and South America, where the value of exports jumped by nearly 50% to £214m. Sales in the US hit £268m, up 14%, and in France rose by 13%, up to £220m. Gavin Hewitt, the SWA's chief executive, said whisky was now a "main driver" for the UK in building overseas markets. The association's success in breaking down trade barriers and strengthening legal protections for the Scotch brand in India and Turkey had been essential, he added. Brazil, China, India? Scotch nations? Surely the growth in Scotch buying there is a sign of a rising consumer class, and bodes well for other luxury items globally. Read the full article here .

Traditional wisdom--that is, most media reports--seem to accept as fact the notion that China's growth is wholly dependent on exports. But McKinsey researchers John Horn , Vivien Singer , and Jonathan Woetzel say that their most recent work shows that China's economy is moving toward more reliance on domestically driven economic growth. And this, they argue in the McKinsey Quarterly , has global business implications: Arguments over the true nature of China’s economic reliance on exports have been rooted in the difficulty of appropriately measuring the export sector. The traditional measure governments and most analysts use is the growth of total exports as a share of GDP growth. This measure indicates that export growth has accounted, on average, for almost 40 percent of the total growth in real GDP since 1990—rising to almost 60 percent since 2000. Yet these numbers, portraying a dominant and growing role of exports, are at odds with the fact that China was one of the few countries that escaped the great 2008–09 global downturn without a major economic slowdown—suggesting that internal growth played an important role. That’s one reason other economists have used a very different measure: growth in net exports (total exports minus total imports) as a share of GDP growth. By that metric, exports contributed only between 10 and 20 percent of China’s annual 10 percent GDP growth in recent years. We contend that both measures are misleading. Using total exports neglects the fact that many of China’s export shipments include a fair number of imported goods that are reassembled, combined with domestic content, or otherwise modified before being exported. Failing to remove these imports from the total export figure overstates how much value exports contribute to GDP. On the other hand, a strict net export measure (exports minus imports) underestimates the contribution of exports to GDP, because many imports aren’t used in assembly and exported but rather sold to Chinese consumers and businesses. Here's a chart showing the shift in growth dependency from McKinsey: Read A truer picture of China's export machine here .