KEY POINTS
- The Q1 2024 DMSI increased by 0.75% to 68.4%.
- The DMSI saw solid growth across many manufacturing sectors, especially computers, electrical equipment, and transportation.
- The DMSI increase was fueled largely by a reduction in the manufacturing trade deficit, with slight improvements in manufacturing output as well.
- Overall DMSI is down 9.5% since 2002, equivalent to an annual loss of $790 billion in domestic market share.
- Q1 2024 manufacturing trade deficit at $253.4 billion.
- Computers/Electronics and Motor Vehicles account for most of the trade deficit improvement.
The CPA Domestic Market Share Index (DMSI) rose slightly in the first quarter of 2024 as domestic manufacturing output edged up and the manufacturing trade deficit contracted slightly.
The final quarterly DMSI for Q1 2024 was 68.4, up from 67.7 in Q4 2023. This indicates that 68.4% of U.S. manufacturing demand was met by domestic production. The remaining 31.6%, was met by imports. The DMSI is the only regularly published indicator tracking the share of U.S. manufacturing demand that is met by domestic production. It is based entirely on U.S. government data.
The improvement in the DMSI was fueled by both an improvement in the U.S. trade deficit in manufactured goods and U.S. manufacturing output. The DMSI is now reaching pre-COVID levels, signaling a potential recovery from the all-time low 2022 DMSI levels. The year 2022 was an exceptionally high import year due to a variety of factors. These include continuing economic recovery after the COVID crisis, a stimulus-induced overheating of the economy, as well as fluctuations and volatility in inventory and supply chains readjusting from COVID lockdowns. Nonetheless, as shown in Figure 1, the current DMSI level is still greatly diminished from its position 20 years ago.
Figure 1: Domestic Market Share Index (DMSI) (2005-2024)
Source: U.S. Bureau of Economic Analysis, U.S. Census; CPA Calculations
Note: Blue line reflects quarterly data. Green line reflects four-quarter moving average.
The DMSI has fallen a total of 9.5% since 2002. The decline in the DMSI is equivalent to $789.5 billion in annual lost domestic manufacturing market share. This annual dollar value lost is larger than the total 2023 U.S. manufacturing exports to Canada, Mexico, China, and Germany combined.
The Q1 2024 DMSI index was up 0.75% compared to 2023’s final quarter. This was largely caused by an improvement in both the manufactured goods trade deficit, but domestic manufacturing output also increased slightly. While still at an alarmingly high $253.4 billion manufactured goods trade deficit for Q1 2024, the deficit is $22.4 billion less than Q4 2023. Further helping the DMSI, total U.S. manufacturing output also increased by $2 billion.
Electrical Products and Transportation See Big DMSI Gains
Many manufacturing sectors saw solid growth in Q1 2024. In total, six sectors experienced more than 2% domestic market share gains. As shown in Figure 2, Electrical Equipment (up 2.9%), Computer Products (up 2.6%), Transportation (Motor Vehicle and Others up by about 2.5%), and Furniture (up 2.3%) all had solid domestic growth in Q1.
Figure 2: DMSI Change by Manufacturing Sector (2024 Q1)
These well-performing Q1 sectors have some of the lowest DMSIs of all sectors, especially Computer Products and Electrical Equipment. Improvements in the domestic market share are especially important for these sectors that have become more reliant on imports over the years. As shown in Figure 3, Computer Products and Electrical Equipment currently hold only 30% and 36% of the domestic market respectively. This means that the United States relies on imports for 70% of Computer Products and 64% of Electrical Equipment.
Figure 3:
Many sectors also experienced losses in domestic market share in Q1 2024. The biggest losses were for Chemical Products (down 1.6%), Wood Products (down 1%), Primary Metals (down 0.8%), and Machinery (down 0.8%). Losses in these sectors were caused more by an increasing flood of imports than losses in manufacturing output. For example, total output for both Chemical Products (the sector with the second-largest total output) and Wood Products increased in Q1 2024, but the overall market share fell nonetheless due to an even larger increase in imports.
The DMSI for the largest manufacturing sub-sector by total output (Food and Beverage and Tobacco Products) had no change. Other major output manufacturing sectors such as Petroleum and Coal Products (up 0.4%) and Fabricated Metal Products (down 0.6%) had more minor DMSI changes.
2024 Q1 Trade Deficit in Manufactured Goods at $253.4 Billion
Even though the overall manufacturing trade deficit improved by $22.4 billion, most manufacturing sectors still show large trade deficits. As shown in Figure 4, the sectors with the largest Q1 2024 trade deficits are Motor Vehicles and Parts (with a -$67 billion deficit) and Computers/Electronics (with a -$55 billion deficit). These remain the sectors with the largest deficit despite having some of the best DMSI improvements in Q1.
Figure 4:
Computers/Electronics and Motor Vehicles/Parts are responsible for most of the reduction in the manufacturing deficit. Even though their deficits remain extremely high, reductions in the trade deficits in both of these sectors make up 70% of the total trade deficit reduction. Computers/Electronics alone accounts for 51% of the trade deficit reduction, while the deficit improvement in Motor Vehicles/Parts makes up another 19%.
The only sectors with trade surpluses are Other Transportation Equipment (which includes large civil aircraft sales from Boeing and airplane parts makers) and Petroleum and Coal. The trade surplus for both of these sectors fell slightly in Q1 but overall experienced little change.
Methodology
The CPA Domestic Market Share Index (DMSI) measures the success of U.S. manufacturing producers in the U.S. market. Over the past two decades, imports have gained a larger share in the U.S. market, leading to millions of lost jobs and industrial decline in many regions and many sectors.
The DMSI is based on the value of production, imports, and exports in U.S. manufactured goods. It is calculated entirely from U.S. government data as the inverse of the import share:
DMSI =100*(1-(imports/(output+imports-exports)).
Changes in the reported annual and quarterly DMSI reflect revisions in government data. For more detailed information on the DMSI including downloadable data, please contact arechenberg@prosperousamerica.org.
