Visualized: The Three Pillars of GDP, by Country
Over the last several decades, the service sector has fueled the economic activity of the world’s largest countries. Driving this trend has been changes in consumption, the easing of trade barriers, and rapid advancements in tech.
We can see this in the gross domestic product (GDP) breakdown of each country, which gets divided into three broad sectors: services, industry, and agriculture.
The above graphic from Pranav Gavali shows GDP by country, and how each sector contributes to an economy’s output, with data from the World Bank.
Drivers of GDP, by Country
As the most important and fastest growing component of GDP, services make up almost 60% of GDP in the world’s 50 largest countries. Following this is the industrial sector which includes the production of raw goods.
Below, we show how each sector contributes to GDP by country as of 2021:
|🇰🇷 South Korea||57.0||32.4||1.8||8.8||$1.8|
|🇸🇦 Saudi Arabia||46.5||44.7||2.7||6.1||$0.8|
|🇭🇰 Hong Kong||89.7||6.0||0.1||4.3||$0.4|
|🇿🇦 South Africa||63.0||24.5||2.5||10.0||$0.4|
Industrial sector includes construction. Agriculture sector includes forestry and fishing. *Data as of 2019.
In the U.S., services make up nearly 78% of GDP. Apart from Hong Kong, it comprises the highest share of GDP across the world’s largest economies. Roughly 80% of American jobs in the private sector are in services, spanning from healthcare and entertainment to finance and logistics.
Like America, a growing share of China’s GDP is from services, contributing to almost 54% of total economic output, up from 44% in 2010. This can be attributed to rising incomes and higher productivity in the sector as the economy has grown and matured, among other factors.
In a departure from the top 10 biggest countries globally, agriculture continues to drive a large portion of India’s GDP. India is the world’s second largest producer of wheat and rice, with agriculture accounting for 44% of the country’s employment.
While the services sector has grown in India, it makes up a greater share in other emerging economies such as Brazil (58%), Mexico (59%), and the Philippines (61%).
Services-led growth has risen faster than manufacturing across many developing nations, underpinned by productivity growth.
This structural shift is seen across economies. In many countries in Africa, for instance, jobs have increasingly moved from agriculture to services and trade, where it now accounts for 42% of jobs.
These growth patterns are supported by rising incomes in developing economies, while innovation in tech is lowering barriers to enabling service growth. As the industrial sector makes up a lower share of trade and economic activity, the service sector is projected to make up 77% of global GDP by 2035.
This article was published as a part of Visual Capitalist's Creator Program, which features data-driven visuals from some of our favorite Creators around the world.
Recession Risk: Which Sectors are Least Vulnerable?
We show the sectors with the lowest exposure to recession risk—and the factors that drive their performance.
Recession Risk: Which Sectors are Least Vulnerable?
In the context of a potential recession, some sectors may be in better shape than others.
They share several fundamental qualities, including:
- Less cyclical exposure
- Lower rate sensitivity
- Higher cash levels
- Lower capital expenditures
With this in mind, the above chart looks at the sectors most resilient to recession risk and rising costs, using data from Allianz Trade.
Recession Risk, by Sector
As slower growth and rising rates put pressure on corporate margins and the cost of capital, we can see in the table below that this has impacted some sectors more than others in the last year:
|Sector||Margin (p.p. change)
|🏡 Household Equipment||-0.9|
|🚗 Automotive Manufacturers||-1.1|
|🏭 Machinery & Equipment||-1.1|
|🖥️ Computers & Telecom||-2.0|
*Percentage point changes 2021- 2022.
Generally speaking, the retail sector has been shielded from recession risk and higher prices. In 2023, accelerated consumer spending and a strong labor market has supported retail sales, which have trended higher since 2021. Consumer spending makes up roughly two-thirds of the U.S. economy.
Sectors including chemicals and pharmaceuticals have traditionally been more resistant to market turbulence, but have fared worse than others more recently.
In theory, sectors including construction, metals, and automotives are often rate-sensitive and have high capital expenditures. Yet, what we have seen in the last year is that many of these sectors have been able to withstand margin pressures fairly well in spite of tightening credit conditions as seen in the table above.
What to Watch: Corporate Margins in Perspective
One salient feature of the current market environment is that corporate profit margins have approached historic highs.
As the above chart shows, after-tax profit margins for non-financial corporations hovered over 14% in 2022, the highest post-WWII. In fact, this trend has been increasing over the past two decades.
According to a recent paper, firms have used their market power to increase prices. As a result, this offset margin pressures, even as sales volume declined.
Overall, we can see that corporate profit margins are higher than pre-pandemic levels. Sectors focused on essential goods to the consumer were able to make price hikes as consumers purchased familiar brands and products.
Adding to stronger margins were demand shocks that stemmed from supply chain disruptions. The auto sector, for example, saw companies raise prices without the fear of diminishing market share. All of these factors have likely built up a buffer to help reduce future recession risk.
Sector Fundamentals Looking Ahead
How are corporate metrics looking in 2023?
In the first quarter of 2023, S&P 500 earnings fell almost 4%. It was the second consecutive quarter of declining earnings for the index. Despite slower growth, the S&P 500 is up roughly 15% from lows seen in October.
Yet according to an April survey from the Bank of America, global fund managers are overwhelmingly bearish, highlighting contradictions in the market.
For health care and utilities sectors, the vast majority of companies in the index are beating revenue estimates in 2023. Over the last 30 years, these defensive sectors have also tended to outperform other sectors during a downturn, along with consumer staples. Investors seek them out due to their strong balance sheets and profitability during market stress.
|S&P 500 Sector||Percent of Companies With Revenues Above Estimates (Q1 2023)|
|Real Estate ||81%|
Cyclical sectors, such as financials and industrials tend to perform worse. We can see this today with turmoil in the banking system, as bank stocks remain sensitive to interest rate hikes. Making matters worse, the spillover from rising rates may still take time to materialize.
Defensive sectors like health care, staples, and utilities could be less vulnerable to recession risk. Lower correlation to economic cycles, lower rate-sensitivity, higher cash buffers, and lower capital expenditures are all key factors that support their resilience.
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