Multifactor productivity indexes relate the change in output to the change in the combined inputs of labor, capital, and intermediate purchases consumed in producing that output. Multifactor productivity measures the joint influences on economic growth of a variety of factors, including technological change, returns to scale, enhancements in managerial and staff skills, changes in the organization of production, and other efficiency improvements.
2005-06, Manufacturing Industries
Multifactor productivity rose in 50 of the 86 manufacturing industries in 2006, as output rose in 48 industries and combined inputs declined in 35 industries. Changes in multifactor productivity were broadly distributed and varied greatly across industries, even within 3-digit industry groups.
The largest increase in multifactor productivity, 23.9 percent, occurred in computer and peripheral equipment (NAICS 3341), followed by an increase of 13.5 percent in communications equipment (NAICS 3342). Output rose rapidly in those industries, greatly exceeding the growth in combined inputs. Multifactor productivity declined 16.0 percent in other nonferrous metal production (NAICS 3314), where combined inputs rose although output decreased. The largest industries had more moderate movements in multifactor productivity. Changes for the twenty largest manufacturing industries varied from -4.5 percent to 4.6 percent.
The number of manufacturing industries with annual multifactor productivity growth increased slightly in 2006 after dropping from 2004 to 2005. For most industries, input growth in 2006 was led by increases in intermediate purchases. Purchases of intermediates increased in 54 industries, while capital services increased in 36 industries and labor hours rose in 37 industries.
2005-06, Transportation Industries
Multifactor productivity rose 3.6 percent in air transportation (NAICS 481) in 2006, as output rose and combined inputs fell. Multifactor productivity rose 2.6 percent in line-haul railroads (NAICS 482111), as output and combined inputs both increased.
Historical Trends, Manufacturing Industries
From 1987 to 2006, multifactor productivity rose in 56 manufacturing industries. Output and combined inputs both rose in 67 industries. (The industries with increasing output were not always the same as those with increasing inputs.) Although more industries registered multifactor productivity growth from 1987 to 2006 than from 2005 to 2006, the average annual change in multifactor productivity was more modest for most industries over the longer term. On average, multifactor productivity grew between 0.1 percent and 3.0 percent per year in 53 industries, and exceeded 3 percent per year in only three industries.
The five manufacturing industries with the fastest growth in multifactor productivity over the longer period were all in the computer and electronic products subsector (NAICS 334). The multifactor productivity growth rates of 17.2 percent per year in computer and peripheral equipment (NAICS 3341) and 14.2 percent in semiconductors and electronic components (NAICS 3344) were much faster than those of any other manufacturing industry.
Multifactor productivity declined in 28 industries from 1987 to 2006. However, the average decline over the period was less than 1 percent per year for all but eight industries. The largest decline in multifactor productivity over the longer period was 1.9 percent per year in accessories and other apparel (NAICS 3159).
From 2000 to 2006, multifactor productivity grew in 63 manufacturing industries, more than in any of the other periods shown. By comparison, 35 manufacturing industries had multifactor productivity growth from 1995 to 2000. However, multifactor productivity growth from 2000 to 2006 was slower in the two industries that led manufacturing productivity growth from 1995 to 2000: computer and peripheral equipment (NAICS 3341) and semiconductors and electronic components (NAICS 3344).
Historical Trends, Transportation Industries
From 1987 to 2006, multifactor productivity increased 2.6 percent per year in line-haul railroads, as output rose 2.6 percent and combined inputs remained unchanged. Multifactor productivity rose more slowly in air transportation, 1.2 percent per year, as output gains averaging 3.4 percent per year were offset by a 2.3 percent average annual increase in combined inputs.
