Manufacturing sector multifactor productivity increased at a 4.7 percent annual rate in 2007, the U.S. Bureau of Labor Statistics reported on February 26. This was the largest gain in multifactor productivity in the series which began in 1987. Multifactor productivity measures the change in output per unit of combined inputs.
Multifactor productivity is designed to measure the joint influences on economic growth of technological change, efficiency improvements, returns to scale, reallocation of resources, and other factors, allowing for the effects of capital, labor and, in the case of the manufacturing sector, intermediate inputs (energy, materials, purchased business services). Multifactor productivity, therefore, differs from labor productivity (output per hour worked) measures that are published quarterly by BLS since it includes information on capital services and other data that are not available on a quarterly basis.
Durable goods manufacturing sector multifactor productivity grew 6.0 percent in 2007, accelerating from its 4.2 percent growth rate in 2006. Non-durable goods manufacturing sector multifactor productivity grew 3.0 percent in 2007, after a 0.6 percent increase in 2006.
Historical trends in manufacturing
Multifactor productivity in manufacturing grew 1.6 percent annually between 1987 (the starting point of the series) and 2007. Sectoral output increased at a 2.4 percent annual rate over the period and combined inputs rose an average of 0.8 percent per year. Output per hour (labor productivity) grew 3.6 percent. For the 2000-2007 period, multifactor productivity in manufacturing rose more rapidly than in previous periods, averaging 2.1 percent per year, slightly outpacing the 2.0 percent growth rate in the 1995-2000 period.
Historical trends in growth in output per hour can be attributed to multifactor productivity growth and the contributions of the intensities of capital and of intermediate inputs. The relationship between labor productivity growth and its components can be seen in table B and chart 2. Chart 2 shows how, relative to output per hour, contributions of multifactor productivity, capital intensity, and intermediate input intensity shifted upward in the latter half of the 1990s. These contributions have slowed somewhat during the 2000-2007 period.
Of the 3.6 percent growth rate in labor productivity in the 1987-2007 period, 1.6 percent can be attributed to increases in multifactor productivity, 0.5 percent to the contribution of capital intensity, 0.7percent to changes in materials intensity, and 0.7 percent to changes in business services intensity.
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