A Note on Demand and Supply Factors in Manufacturing Output Asymmetries

We study the dynamics of the manufacturing component of GDP. We first document that the output growth rate for the majority of sectors and their aggregates is different (asymmetric) in recessions and expansions. Compared to expansions, recessions are deeper deviations from trend and have shorter expected duration. This finding raises a basic question that we address in this paper. Which factors of production may be responsible for the sectoral asymmetry? We characterize asymmetry using aggregate quarterly data on sectoral output from 1967 to 1997. We estimate a sector-level Markov switching model in which transition probabilities between recession and expansion may differ. We find that unlike aggregate GDP, the majority of durable goods manufacturing sectors exhibit deep recessions. Our main methodological contribution is augmentation of the Markov switching model to include aggregate economic factors. We examine whether the sector output asymmetry may be related to aggregate macroeconomic factors such as oil price shocks, macroeconomic leading indicators, and a measure of relative