Multifactor Productivity Trends for Detailed Industries News Release

For release 10:00 a.m. (EDT) Tuesday, September 29, 2015	                                USDL-15-1894

Technical Information:	(202) 691-5618  •  dipsweb@bls.gov  •  www.bls.gov/mfp 
Media Contact:	        (202) 691-5902  •  PressOffice@bls.gov


                       MULTIFACTOR PRODUCTIVITY TRENDS FOR DETAILED INDUSTRIES, 2013

Multifactor productivity - defined as output per unit of combined inputs - rose in 38 of the 86 4-digit 
NAICS manufacturing industries in 2013, as well as in the two transportation industries that are 
measured, the U.S. Bureau of Labor Statistics reported today. This was up from 2012, when multifactor 
productivity increased in 35 manufacturing and in the two transportation industries. 

Multifactor Productivity: Definition and Concepts

Multifactor productivity indexes relate the change in real output to the change in the combined inputs of 
labor, capital, and intermediate purchases consumed in producing that output.

Multifactor productivity growth measures the extent to which output growth exceeds the growth in 
inputs. A variety of factors that influence economic growth are not specifically accounted for among 
measured inputs, including: technological change, returns to scale, enhancements in managerial and staff 
skills, changes in the organization of production, and other efficiency improvements. Multifactor 
productivity reflects these factors. 

2013 Trends in Multifactor Productivity

Among manufacturing industries, the greatest increase in multifactor productivity occurred in 
communications equipment (17.3 percent). Four other industries experienced multifactor productivity 
gains greater than 6.4 percent: seafood product preparation and packaging, audio and video equipment, 
alumina and aluminum production and processing, and iron and steel mills and ferroalloys.
     
In the two measured transportation industries, multifactor productivity increased 1.6 percent in air 
transportation and 0.5 percent in line-haul railroads. 

Components of Multifactor Productivity Growth: Output and Combined Inputs

In 2013, 43 industries experienced increases in both output and combined inputs. In 2012, 50 industries 
experienced increases in both components.

In 2013, output increased in 57 manufacturing industries, the same number as in 2012. The following 
industries had double-digit increases in output in 2013:
  *     Agricultural chemicals (16.1 percent)
  *     Railroad rolling stock (14.1 percent)
  *     Communications equipment (11.3 percent)

Output declined the most in footwear (-12.7 percent) and in magnetic media manufacturing and 
reproducing (-11.2 percent).

Combined inputs of capital, labor, and intermediate purchases rose in 57 manufacturing industries in 
2013, compared to 62 industries in 2012. Growth in intermediate purchases was widespread, rising in 60 
industries. Fewer manufacturing industries experienced growth in labor hours (43 industries) and capital 
services (33 industries). 

The following industries had the largest increases in combined inputs in 2013:
  *     Household appliances (17.0 percent)
  *     Leather and hide tanning and finishing (16.8 percent)
  *     Railroad rolling stock (16.2 percent)
  *     Agricultural chemicals (9.1 percent)
  *     Motor vehicle bodies and trailers (8.9 percent)

For some manufacturing industries, multifactor productivity rose despite falling output, as combined 
inputs fell more rapidly. This occurred in three industries:
  *     Other leather and allied products
  *     Computer and peripheral equipment
  *     Electric lighting equipment

Multifactor productivity rose in 17 of the 28 manufacturing industries that recorded a decline in 
combined inputs in 2013. Within this group, the largest declines in combined inputs occurred in 
computer and peripheral equipment and in communications equipment. 

In the air transportation industry, output increased 1.4 percent and combined inputs declined 0.2 percent. 
In line-haul railroads, output rose 2.7 percent and combined inputs increased 2.2 percent.

Long Term Trends in Multifactor Productivity

Year-to-year movements and long-term trends in industry multifactor productivity may both reflect 
cyclical changes in the economy. However, long-term average annual changes in multifactor 
productivity are more reliable indicators of historical trends in industry performance.

More industries experienced multifactor productivity growth over the long term than in the short term. 
From 1987 to 2013, 57 industries increased, compared to 38 in 2013. Average annual rates of change in 
multifactor productivity for nearly all manufacturing industries ranged between -2.0 and 2.0 percent 
over the long term.
	
In contrast, 2013 multifactor productivity growth rates varied. For example, multifactor productivity 
declined by 2.0 percent or more in 24 industries. However, only one industry (pharmaceuticals and 
medicines) experienced average annual decline of that magnitude. 

Between 1987 and 2013, the number of manufacturing industries with growth in multifactor productivity 
was highest in 2003 and 2010. These were years of economic growth following recessions. In contrast, 
relatively few manufacturing industries saw multifactor productivity growth in the recession years of 
2001 and 2009.

From 1987 to 2013, multifactor productivity rose in both air transportation and line-haul railroads by 1.3 
and 1.9 percent, respectively. While both industries experienced increases in output, productivity grew 
more in line-haul railroads because its combined inputs showed very slight long-term growth. 

Source Data Revisions and Improvements

This news release incorporates 2013 and 2012 data, as well as revisions in earlier years, from the Annual 
Survey of Manufacturers and the 2012 Economic Census. It also incorporates the annual benchmark 
revisions of the BLS Current Employment Statistics (CES) survey published in February 2015. All 
measures in this release are subject to revision.

The capital services component of combined inputs for manufacturing industries includes for the first 
time benchmark capital investment data from the Census Bureau’s Annual Capital Expenditures Survey 
(ACES). Capital structure assets have been expanded from two categories to ten by using the ACES 
benchmark data for 2008 and 2012. Capital equipment assets have been reduced from 25 categories to 
24 by combining some obsolete or rare equipment types. Capital services measures for manufacturing 
and air transportation also incorporate changes from the 2013 Bureau of Economic Analysis (BEA) 
comprehensive data revision.

The intermediate purchases component of combined inputs incorporates the 2007 BEA benchmark 
input-output tables as well as revisions to the 1997 and 2002 tables. Intermediate purchases in this 
release are calculated using improved price deflators for purchased materials commodities. 

For the first time, the industries included in this news release are classified according to the 2012 North 
American Industrial Classification System (NAICS). While the rates of change reported by BLS in this 
news release are rounded to one decimal place, all industry productivity percent changes are calculated 
using index numbers rounded to three decimal places.


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                                         Technical Note

Multifactor Productivity:  Multifactor productivity measures are derived by dividing an index of real 
industry output by an index of the combined inputs of labor, capital, and intermediate purchases. The 
multifactor productivity indexes do not measure the specific contributions of capital, labor, and 
intermediate inputs.  Rather, they reflect the joint influences on economic growth of a number of factors 
that are not specifically accounted for on the input side, including technological change, returns to scale, 
improved skills of the workforce, better management techniques, or other efficiency improvements.

Output:  Manufacturing industry output is measured as annual sectoral output, the total value, in real 
terms, of goods and services produced for sale outside the industry. Industry value of production is 
derived by adjusting industry shipments for changes in inventories and subtracting intra-industry 
transfers and resales. For most manufacturing industries, real output is measured by deflating nominal 
value of production, but for some industries physical quantities of output are measured. For air 
transportation and line-haul railroads, output is measured by aggregating passenger-miles and freight 
ton-miles with weights based on revenues or operating expenses.  

Output measures for manufacturing industries are constructed using data primarily from the economic 
censuses and annual surveys of the Bureau of the Census, U.S. Department of Commerce, together with 
information on price changes chiefly from the Bureau of Labor Statistics (BLS). Output measures for air 
transportation and line-haul railroads are constructed using data primarily from the Bureau of 
Transportation Statistics (BTS) and the Surface Transportation Board (STB), both in the U.S. 
Department of Transportation (DOT), together with information from the Association of American 
Railroads (AAR), AMTRAK, and several other sources.  

Combined Inputs:  The index of combined inputs is a Törnqvist index of separate quantity indexes of 
capital, labor, and intermediate purchases (including fuels, electricity, materials, and purchased 
services). The annual growth rates of the various inputs are aggregated using their relative cost shares as 
weights. The labor weight is based on labor compensation, including fringe benefits. The weight for 
intermediate purchases is based on the total cost of materials, fuels, electricity, and purchased services. 
The capital weight is based on total capital cost, which is calculated as the value of sectoral production 
minus the costs of labor compensation and intermediate purchases.

Capital Input:  Capital input reflects the flow of services derived from the stock of physical assets. 
Capital services are estimated by calculating productive capital stocks and are assumed to be 
proportional to changes in these capital stocks for each asset. The capital index is a Törnqvist index of 
separate quantity indexes of equipment, structures, inventories, and land. 

For manufacturing industries, physical capital is comprised of 24 categories of equipment, 10 categories 
of structures, 3 categories of inventories, and land. Measures of total capital services for each industry 
are estimated by aggregating the capital stocks of individual asset types. Estimates of investment by 
asset type for each industry are derived using annual capital expenditures for detailed industries from the 
economic censuses and annual surveys of the Bureau of the Census. Additional annual investment data 
comes from the fixed asset accounts from the Bureau of Economic Analysis (BEA). Annual investment 
data is supplemented with the 1997 benchmark capital flow table from the BEA as well as the 2008 and 
2012 Annual Capital Expenditures Survey from the Bureau of the Census. Price changes are removed 
from the annual investment data before calculating stocks. Price deflators for each asset category are 
constructed by combining detailed price indexes (mostly BLS Producer Price Indexes) with weights that 
reflect each industry’s use of individual asset commodities.

The capital stocks for the different assets are combined using weights based on estimated annual rental 
prices for each asset type, averaged between two time periods. Each rental price reflects the nominal rate 
of return to all assets within the industry and the rates of economic depreciation and revaluation of the 
specific asset. Rental prices are adjusted for the effects of taxes. 

For air transportation, a weighted index of 44 types of airframes and 34 types of engines is derived from 
quantities and purchase prices from BTS. For assets other than airframes and engines, capital stocks are 
calculated similarly to manufacturing industries. For these assets, a more detailed breakdown of annual 
expenditures on equipment and structures from the BEA is used. Inventories of parts and supplies are 
also included; the current dollar series is deflated with a weighted cost index based on data from Airlines 
for America (A4A) and BTS. Indexes for aircraft and engines, non-aircraft assets, and parts and supplies 
inventories are aggregated using cost share weights to derive an overall measure of capital input.

For line-haul railroads, current dollar investment for 10 categories of equipment and 13 categories of 
structures, obtained from STB and AMTRAK, are deflated with BLS PPIs and deflators based on BEA 
data. The capital stocks for each of the items are calculated similarly to manufacturing industries. 
Inventories of materials and supplies are also included. Estimates of investments in land from STB and 
AMTRAK were deflated with price indexes from BEA.  

Labor Input:  For manufacturing industries, labor hours reflect annual hours worked by all employed 
persons in an industry. Data on industry employment and hours come primarily from the BLS Current 
Employment Statistics (CES) survey and the Current Population Survey (CPS). CES data on the number 
of total and nonsupervisory worker jobs held by wage and salary workers in nonfarm establishments are 
supplemented with CPS self-employed and unpaid family worker data to estimate industry employment. 
Hours worked estimates are derived using CES and CPS employment, CES data on average weekly 
hours paid of nonsupervisory workers, CPS data on hours of supervisory, self-employed, and unpaid 
family workers, and ratios of hours-worked to hours-paid based on data from the BLS National 
Compensation Survey (NCS). For some industries, employment and hours data are supplemented or 
further disaggregated using data from the BLS Quarterly Census of Employment and Wages (QCEW), 
the Census Bureau, or other sources. Hours worked are estimated separately for different types of 
workers and then are directly aggregated; no adjustments for labor composition are made. 

For air transportation, annual labor input estimates are based on monthly employment data from DOT 
supplemented by employment and hours from the CES program and hours from the CPS. For line-haul 
railroads, labor input measures are derived primarily from DOT data and supplemented with data from 
AAR. For the railroad industry, the labor input measure includes an adjustment to remove capitalized 
labor hours in order to avoid double-counting because some capitalized labor costs are embedded in the 
railroad investment data.

Intermediate Purchases Input:  The index of intermediate purchases is a Törnqvist index of separate 
quantities of materials, purchased services, fuels, and electricity consumed by each industry. Except for 
electricity consumed by manufacturing industries, for which direct quantity data are available, quantities are 
derived by deflating current-dollar values with appropriate price deflators. 

For manufacturing industries, nominal values of materials, fuels and electricity, along with quantities of 
electricity consumed by each industry are obtained from economic censuses and annual surveys of the 
Bureau of the Census. To avoid double counting, an adjustment is made to the materials estimates to 
exclude the value of intra-industry commodity transfers. Purchased business services are estimated using 
annual industry data and benchmark input-output tables from BEA.  

Constant-dollar materials consumed are derived by dividing annual current-dollar industry purchases by 
a weighted price deflator for each industry. Aggregate materials deflators are constructed for each industry 
by combining producer price indexes and import price indexes from BLS for detailed commodities.  The 
deflators are combined using weights based on detailed commodity data from the BEA benchmark input-
output tables. Aggregate price indexes to deflate purchased business services are constructed in a similar 
manner using consumer price indexes (CPIs), PPIs, and deflators developed by BEA. The value of fuels 
consumed by each industry is deflated with a weighted price deflator based on PPIs for individual fuel 
categories; the weights reflect fuel expenditures by industry from the Energy Information 
Administration (EIA), U.S. Department of Energy.

For air transportation, detailed cost of materials, services, fuels, and electricity from the BTS were 
deflated using cost indexes from A4A. For line-haul railroads, intermediate purchases data from STB 
were supplemented with data from other sources including AAR, AMTRAK, EIA, and the Edison 
Electric Institute. The nominal values were deflated with producer price indexes from BLS and implicit 
price deflators calculated from BEA investment data.