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How is productivity measured? > Other inputs

How are materials measured?

Material inputs are goods that are used to produce other goods and services. They include both raw materials and manufactured products.

Examples:

Material input quantity index

Material inputs are represented by a material input quantity index. The quantity index is calculated from an index of the cost of materials and an index of the price of materials.
The material input quantity index is calculated by dividing the cost of materials index by the price of materials index to remove the effects of changes in prices over time.

Example: An apparel manufacturer spends $3,770,000 on fabric one year, $4,396,000 the following year, and $4,619,000 the third year. The price of fabric rises 8.28 percent in the second year and then falls in the third year to a level that is 2.76 percent above its base year (year 1) level.

The following table shows the cost of materials and the cost, price, and quantity of materials indexes for the apparel manufacturer:

Year 1: Cost of Materials $3,770,000, Cost of Materials Index (Year 1 =100) 100.00, Price of Materials Index (Year 1 = 100) 100.00, Quantity of Materials Index (Cost of materials/price of materials) 100.00 Year 2: Cost of Materials $4,396,000, Cost of Materials Index (Year 1 =100) 116.61, Price of Materials Index (Year 1 = 100) 108.28, Quantity of Materials Index (Cost of materials/price of materials) 107.69 Year 3: Cost of Materials $4,619,000, Cost of Materials Index (Year 1 =100) 122.52, Price of Materials Index (Year 1 = 100) 102.52, Quantity of Materials Index (Cost of materials/price of materials) 119.23.

Data on the cost of materials used in production come from agencies in the Department of Commerce, which collect information from U.S. businesses on how much they spend on material inputs in each year.

How is energy measured?

Energy inputs are the fuels and electricity used to produce goods and services.

Energy inputs are represented by an energy input quantity index. The quantity index is calculated from an index of the cost of energy and an index of the price of energy.
The energy input quantity index is calculated by dividing the cost of energy index by the price of energy index to remove the effects of changes in prices over time.

Example: A hair salon uses electricity to power all its equipment. The salon’s electricity costs are $15,467 in one year, $16,758 the following year, and $18,532 the third year. The price of electricity rises by 5.74 percent in the second year and rises again in the third year to a level that is 8.40 percent above its base year level.

The following table shows the cost of energy and the cost, price, and quantity of energy indexes for the salon.

Year 1: Cost of Energy $15,467, Cost of Energy Index (Year 1 =100) 100.00, Price of Energy Index (Year 1 = 100) 100.00, Quantity of Materials Index (Cost of energy/price of energy) 100.00 Year 2: Cost of Energy $16,758, Cost of Energy Index (Year 1 =100) 108.35, Price of Energy Index (Year 1 = 100) 105.74, Quantity of Energy Index (Cost of energy/price of energy) 103.52 Year 3: Cost of Energy $18,532, Cost of Energy Index (Year 1 =100) 119.82, Price of Energy Index (Year 1 = 100) 108.40, Quantity of Energy Index (Cost of energy/price of energy) 105.73.

Data on the cost of energy used come from agencies in the Department of Commerce, which collect information from U.S. businesses on how much they spend on energy inputs in each year.

How are purchased services measured?

Purchased services inputs are services that a business pays other businesses to perform. These services are used to produce goods and services or to run the business.

Examples:

  • Accounting services
  • Legal services
  • Automotive repair and maintenance
  • Laboratory analysis of products
Purchased service inputs are represented by a service input quantity index. The quantity index is calculated from an index of the cost of services and an index of the price of services.
The service input quantity index is calculated by dividing the cost of services index by the price of services index to remove the effects of changes in prices over time.

Example: A furniture manufacturing company has a contract with an accounting firm that provides payroll services. The furniture company pays the accounting firm $20,000 in one year, $21,000 the following year, and $22,500 the third year. The price of accounting services rises by 3.521 percent in the second year and rises again in the third year to a level that is 5.730 percent above its base year level.

The following table shows the cost of purchased services and the cost, price, and quantity of purchased services indexes for the furniture company:

Year 1: Cost of Purchased Services $20,000, Cost of Purchased Services Index (Year 1 =100) 100.00, Price of Purchased Services Index (Year 1 = 100) 100.00, Quantity of Purchased Services Index (Cost of services/price of services) 100.00 Year 2: Cost of Purchased Services $20,000, Cost of Purchased Services Index (Year 1 =100) 105.00, Price of Purchased Services Index (Year 1 = 100) 103.521, Quantity of Purchased Services Index (Cost of services/price of services) 101.429 Year 3: Cost of Purchased Services $22,500, Cost of Purchased Services Index (Year 1 =100) 112.500, Price of Purchased Services Index (Year 1 = 100) 105.730, Quantity of Purchased Services Index (Cost of services/price of services) 106.403.

Data on the cost of purchased services used come from agencies in the Department of Commerce, which periodically collect information from U.S. businesses on how much they spend on purchased service inputs.