A report released by the Federal Reserve Bank of San Francisco says that more than half the amount spent on products made in China actually stays here — going to American companies, workers, marketers, retailers, and transport providers, according to a CNN Money story. For every $1 spent, the amount that stays here in the U.S. is at least 55 cents—to put that in more tangible terms, if you’re buying a pair of $70 shoes, $38.50 of it boosts bottom lines here in the U.S. TransWorld Business also did our homework and found out first hand from apparel companies the pros and cons of production in the U.S. versus overseas.
And despite what you may conclude from shopping at Wal-Mart (WMT) or other large stores — or hearing big, scary figures about the trade deficit with China — imports from China make up just a very small portion of our total economy: just 2.5% of gross domestic product in 2010. Overall, products from around the world accounted for only 16% of our GDP last year. “The vast majority of goods and services sold in the United States is produced here,” according to FRBSF report authors Galina Hale and Bart Hobijn. The exceptions are furniture and household items, electronic goods, and clothing and shoes. A third of U.S. consumer purchases for clothing and shoes in 2010 carried a “Made in China” label. For furniture, it was one fifth.
The reason for the new FRBSF report is the red flag raised by China’s growing inflation. The latest numbers from Beijing show a 6.5% annual rise across the country in July, up from 6.4% in June and breaking a three-year record. But with such low levels of Chinese content in products like iPhones, the report’s authors conclude that recent increases in labor costs and inflation in China are not likely to translate into broad inflationary pressures in the U.S. “This suggests that Chinese inflation will have little direct effect on U.S. consumer prices,” Hale and Hobjin say. Given the state of the U.S. economy these days, consumers can take that data and breathe a small sigh of relief.
TAGS: cnn money, domestic debate, inflation, made in china
