30 Examples of Intermediate Goods

Amid the intricate web of economic activities, the concept of intermediate goods plays a pivotal but often overlooked role. These goods, situated between raw materials and finished products, form the backbone of supply chains, impacting production processes, economic indicators, and overall market dynamics. Understanding the significance of intermediate goods unveils their profound influence on modern economies. While producing mixer grinders, the company uses intermediate goods like steel, wires, plastic, etc. Their values are already considered in the cost of mixer grinders sold to consumers.

Intermediate goods are not counted as part of GDP because they are already accounted for indirectly through the value added at each production stage. Intermediate goods, often termed “producer goods” or “semi-finished goods,” are products utilized in the production of other goods rather than being consumed directly by end consumers. Unlike final goods that find their way to store shelves and consumer homes, intermediate goods are essential components that undergo further processing before reaching their final form. These goods can encompass a broad spectrum, ranging from components used in manufacturing to materials involved in construction. During the manufacturing process of producing completed items, intermediate goods may either become a component of the final product or they may undergo significant changes. Capital goods are mostly tangible assets, the capital goods are physical in nature.

Processed Materials

Intermediate goods that fit both the intermediate and finished goods inventory classification can be used as ingredients for other things or consumed as a final product. The classic example of this is salt, which the baker can use to make bread, or a consumer can sprinkle on their dinner. Another example is sand, which can be used as an intermediate good to make concrete or glass or sold directly to consumers to fill a sandbox. Final goods, also called consumption goods or finished goods, are items that we buy to use or consume directly. Intermediate goods are things that become part of final goods including raw materials.

So, what is the difference between intermediate goods and finished goods? Basically, intermediate goods are components or materials used in the production of examples of intermediate goods finished goods. Intermediate goods are also referred to as semi-finished products or producer goods and are typically sold between businesses, such as a producer selling to a manufacturer.

1. The farm’s sales of blueberries to the general public will be counted toward the computation of the U.S.
2. Industries acquire and sell intermediate goods among themselves in addition to producing their own intermediate goods.
3. Some intermediate goods can be directly used without further processing in the industry to make another product or the same goods can be used for producing another good.

How Do Intermediate Goods Impact the GDP?

Businesses usually sell these goods to other companies to be used to make a finished product, or in some cases, to be resold directly to consumers. There are times when intermediate goods are used to make other intermediate goods that are then used to make finished goods. This could spell disaster for your brand image and your profits. Many small businesses, depending on their industry, decide to create their own intermediate goods. Having control over your intermediate goods can stop you from experiencing supply chain strain. You must take steps to secure your trade flows of intermediate goods if you import most of them.

Click below to consent to the above or make granular choices. You can change your settings at any time, including withdrawing your consent, by using the toggles on the Cookie Policy, or by clicking on the manage consent button at the bottom of the screen. Any commodity based on its nature of use can be either classified as a final good or an intermediate good. This is why GDP measurement methods only count the value of the final goods to avoid counting the same goods more than once.

Categories of Intermediate Goods

You can most easily account for all the goods in your warehouse with inventory software that automates your end-to-end inventory management. Capital goods don’t get transformed by dissolving or changing shape during production. For example, when the baker uses the intermediate good salt to create his bread, the salt is transformed into an indistinguishable element of the final loaf. But when he uses the oven, a capital good, the machine doesn’t change while baking the loaf.

Instead, their value is accounted for in a way that avoids double-counting and accurately measures the final value added to the economy. The farm’s sales of blueberries to the general public are counted when determining the farm’s contribution to the US GDP; however, sales of blueberries to supermarkets and a jam factory are not. This avoids duplicate counting since the product will be sold to end users by grocery stores and jam producers, who will also be included in the GDP calculation. Operationally, optimizing the inventory of intermediate items is equally crucial to optimizing the inventory of completed goods. Under stocking could result in production delays for completed items, which could result in stock outs — that is, not enough product to satisfy consumer demand. Overstocking will result in higher carrying costs and run the risk of ingredients rotting or going out of date.

Businesses can use intermediate goods in various ways to create a range of final goods. Steel, for example, is used in constructing homes and cars, building bridges, and making home appliances, among many other things. A World Trade Organization (WTO) study about intermediate goods reported a continuing growth streak in the intermediate goods exported worldwide in 2021 (Q4). However, the 21% year-on-year growth declined compared to the previous quarter, which stood at 27% in Q3. The prominent intermediate goods during this period were metals, crops, food products, etc. Below are some common forms of intermediate goods used in production.

It becomes final goods when kitchen sinks manufactured using this steel are sold to customers. Finally, secondary intermediate products can be created using intermediate goods. For instance, a farmer may raise flax plants that are subsequently sold to a miller (as an intermediary good) for processing into flaxseed (commonly used in many types of healthy food).