Manufacturing continues to shrink as a percentage of U.S. economic activity.

Manufacturing's share of the U.S. economy continues its 50-year decline. Last year, manufacturing GDP fell to an all-time low of just 12 percent of the economy, according to a Manufacturers Alliance/MAPI analysis of recent data from the Commerce Department.

"Both major segments of manufacturing--durable

In 1993, manufacturing as a percentage of the U.S. economy stood at 15.9 percent, down from its post World War II peak of 28.3 percent in 1953.

Other industries associated with manufacturing shrank over the last 10 years including retail and wholesale trade, transportation and warehousing, according to the analysis done by Daniel Meckstroth, MAPI's chief economist. The government's share of GDP fell by 1 percentage point to 12.4 percent, which is above the 12 percent GDP level for manufacturing.

The service sector now accounts for 80.6 percent of U.S. gross domestic product, an increase of 2.6 percentage points over the past 10 years. Finance and insurance were the largest gainers, growing by 1.5 percentage points, to reach 8.1 percent of GDP. Professional, scientific and technical services increased its share of GDP by 1.1 percentage points to 6.9 percent. The largest contributor to GDP in 2005: real estate, rental and leasing, at 12.5 percent.

"Manufacturing experienced deflation in an inflationary economy" over the 10-year period, MAPI points out. "GDP is measured by multiplying the change in quantity by the change in price. The quantity of manufacturing value added increased 40 percent from 1995 to 2005 while manufacturing prices declined 9 percent. As a result, manufacturing GDP increased 27 percent. However, more than all the deflation in manufacturing came from one industry--computer and electronic products.... When computer and electronic products are excluded from manufacturing, a more realistic breakdown of price and quality changes emerge ... Value added in manufacturing, excluding computer and electronic products value added, increased at the slowest rate of any of the major industries except agriculture. Manufacturing prices, excluding computer and electronics products, increased 17 percent from 1995 to 2005, while the quantity of manufactured goods increased 11 percent ... substantially underpeforming growth in the general economy. Manufacturing value added, excluding computer and electronic products, thus increased 30 percent over the last 10 years. The average annual growth rate from 1997 to 2005 for manufacturing excluding computer and electronic products is only 1.2 percent. Average annual growth for manufacturing including computers and electronic products is 3.0 percent; and overall inflation adjusted GDP is 3.1 percent per year."