CHART OF THE DAY: Manufacturing Capacity Was Demolished In 2009

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In 2009, the U.S. experienced one of the worst bouts of manufacturing capacity destruction in decades.

This is shown by the relatively large negative bar for 2009, below.

This capacity destruction was likely the result of inefficient and outdated U.S. capacity being rendered uncompetitive as the economic downturn separated the wheat from the chaff.

Is it a bad thing? Actually, no. The removal of uncompetitive capacity means that the remaining players face less over-capacity going forward. If there are too many weak players, they all kill each other via price competition. In the long-run this is what we want to happen — weaker players are mothballed during downturns, making room for stronger ones.

The trend we show was keenly and originally highlighted by the excellent site Econompic, though our numbers may be slightly different. Definitely check their site out.

chart of the day, Manufacturing Capacity Growth

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