U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov

Macro-Industrial Working Group

Elizabeth Sendich, Analyst, and Kay Smith, Team Leader

Macroeconomic Analysis Team

September 26, 2013

Preliminary AEO2014 Macroeconomic 

Industrial Results

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Overview

• Preliminary AEO2014 industrial macroeconomic results; runs 

as of Sept. 23, 2013.

• Macroeconomic results are inputs for a variety of NEMS 

modules, and cover:

– Overall economy (for example GDP, interest rates, exports, etc.)

– Sectoral detail (for example output of goods and services, employment, etc.)

• Reference Case with the Global Insights’ (GI) May Long-term 

Trend forecast and this year’s Industrial IO changes, largest 

impact being:

– Construction

– Bulk chemicals

2

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13 DO NOT CITE OR DISTRIBUTE
Macroeconomic Modeling in NEMS

3

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

NEMS MAM

NEMS Macro 

Baseline 

Variables

Macroeconomic Submodule runs 

the New Scenario using new Energy 

Inputs from NEMS

NEMS

Energy 

Variables

Industry Submodule runs the New 

Scenario of values of shipments by 

industry sectors

MAM applies 

the ratios of the 

New Scenario 

values over the 

Baseline values 

onto the Macro 

Baseline 

variables to 

obtain solution

Employment Submodule runs the 

New Scenario of employment by 

sector

Regional Submodule and Commercial 

Floorspace Submodule

MAM variables for use 

as input to NEMS

NEMS

Modules

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National macroeconomic model

• Uses Global Insight’s macroeconomic model, whose forecast 

horizon matches NEMS

• Keynesian model capturing short-run cyclical developments 

with long-run equilibrium as specified by production function

• Model of output, prices and financial conditions allows 

depiction of both monetary and fiscal policies.

• The level of inflation-adjusted demand is driven by the price 

level, income, wealth, and financial conditions. Supply is 

keyed to a production function combining inputs of labor 

hours, energy, and capital stocks of business equipment, 

structures and government infrastructure. 

• Major drivers: total factor productivity, labor supply, capital 

stock

4

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13 DO NOT CITE OR DISTRIBUTE
Industry Submodule: value of shipments by 

industry

• Econometric equations are run for the ratio of gross output 

(production) and demand computed from Input-Output 

basis

• Major drivers: capacity utilization, interest rates, relative 

prices, population, other macroeconomic variables like 

housing starts and medical spending, and a trend variable for 

technological changes

– For energy-intensive manufacturing industries, industrial energy prices also 

determine their output

• For the energy industries (coal mining, oil & gas extraction, 

petroleum refining, electric and gas utilities), forecasts are 

replaced by production forecasts from other NEMS Modules

5

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13 DO NOT CITE OR DISTRIBUTE
Industries using NEMS energy prices in econometrics

6

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

NAICS Code Industry Price dependencies

3115 Food: Dairy NG

322 Pulp & paper Fuel Index

32511a9 Bulk chemicals: Organic Feedstocks

32512t8 Bulk chemicals: Inorganic NG

3252 Bulk chemicals: Resins Feedstocks

3253 Bulk chemicals: Agriculture NG

325o Other chemicals NG

326 Plastic products Fuel Index

32731 Cement Fuel Index

3311a2 Iron and steel Fuel Index

3313 Aluminum Electricity

331o Other primary metals Fuel Index

336 Transportation equipment NG

“Fuel Index” is a consumption weighted composite of all industrial energy prices

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First half of projected growth driven by investment and exports; 

latter half more even amongst GDP Components

7

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

Average annual growth rate within period

Source: ref2014.d092013a

History Projection

-1%

0%

1%

2%

3%

4%

5%

6%

7%

1995-2010 2011-2025 2025-2040

Real GDP Personal Consumption Imports Exports Government

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Average growth rates of net exports by category show strong export 

impacts from industrial supplies early and consumer goods throughout

8

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

Net annual average growth rate

Source: ref2014.d092013a

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2012- 

2040

2012- 

2015

2015-

2020

2020-

2025

2025-

2030

2030-

2035

2035- 

2040

all goods Industrial Supplies Capital Goods Consumer Goods Services

Overall 

average

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Oil price (WTI)

9

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

0

30

60

90

120

150

180

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

AEO2014

AEO2013

Real 2012 dollar per barrel

Source: ref2014.d092013a

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Natural gas price

10

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

0

2

4

6

8

10

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

AEO2014

AEO2013

Real 2012 dollar per million BTU

Source: ref2014.d092013a

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Combined fuel price index

11

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

0

1

2

3

4

5

6

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

AEO2014

AEO2013

1982=1

Source: ref2014.d092013a

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New ethane price

12

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

0

5

10

15

20

25

30

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Real 2012 dollar per million BTU

Source: ref2014.d092013a

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Initial industrial results consistent with new 

macro simulation

13

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

• Overall gross output growth is about 0.1 percent lower in 

AEO2014 runs compared to the AEO2013 projection, similar 

to the differential in GDP growth.

• Composition of industrial growth shifts, with manufacturing 

gaining share of gross output. By 2040, manufacturing is 

nearly 18 percent of gross output; in AEO2013 manufacturing 

share reached 16 percent.

• Consistent with slower growth in consumption, services 

growth is lower, especially retail trade and financial services.

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Total output of goods and services

14

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

Billion 2005 dollars

Source: ref2014.d092013a

15,000

25,000

35,000

45,000

55,000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

GI Baseline for AEO2013

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Total output of goods and services

15

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

Billion 2005 dollars

Source: ref2014.d092013a

15,000

25,000

35,000

45,000

55,000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

GI Baseline for AEO2013 GI Baseline for AEO2014

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Total output of goods and services

16

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

Billion 2005 dollars

Source: ref2014.d092013a

15,000

25,000

35,000

45,000

55,000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2013

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Total output of goods and services

17

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

Billion 2005 dollars

Source: ref2014.d092013a

15,000

25,000

35,000

45,000

55,000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 AEO2013

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Sub-sector breakout

(billion 2005 dollar)

18

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Manufacturing

1,000

1,250

1,500

1,750

2,000

2,250

2,500

Energy Intensive Industries

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Plant-based, energy-intensive industries

(billion 2005 dollar)

19

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a

400

500

600

700

800

900

1,000

Food

0

50

100

150

200

250

Paper

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Basic bulk chemicals

(billion 2005 dollar)

20

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a

0

50

100

150

200

250

Organic

0

10

20

30

40

50

Inorganic

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Other bulk chemicals

(billion 2005 dollar)

21

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a

0

50

100

150

200

Resins

0

5

10

15

20

25

30

Agricultural

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Economic contribution of bulk chemicals becomes smaller 

relative to non-intensive chemicals

22

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

Billion 2005 dollar

Source: ref2014.d092013a

0

200

400

600

800

1,000

1,200

1,400

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Bulk chemicals Pharma Paints Soaps Other

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Energy-intensive primary metals

(billion 2005 dollar)

23

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a

0

50

100

150

200

Iron and Steel R3311a2

0

10

20

30

40

50

60

Aluminum R3313

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All primary metals

24

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

Billion 2005 dollar

Source: ref2014.d092013a

100

150

200

250

300

350

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 AEO2013

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Energy-intensive non-metallic minerals*

(billion 2005 dollar)

25

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a; *also know as stone, clay, and glass (SCG)

0

5

10

15

20

25

30

35

Glass

0

2

4

6

8

10

12

Cement

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All non-metallic minerals*

26

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

Billion 2005 dollar

Source: ref2014.d092013a; *also know as stone, clay, and glass (SCG)

0

40

80

120

160

200

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 AEO2013

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Metal-based durables

(billion 2005 dollar)

27

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a

0

100

200

300

400

500

Fabricated metals

0

200

400

600

800

Machinery

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Metal-based durables

(billion 2005 dollar)

28

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a

0

200

400

600

800

1,000

1,200

Computers & electronics

0

300

600

900

1,200

1,500

1,800

Transportation equipment

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Metal-based durables

(billion 2005 dollar)

29

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a

0

50

100

150

200

250

Electrical equipment & 

appliances

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Metal-based durables sum

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Non-manufacturing*

(billion 2005 dollar)

30

Macro-Industrial Working Group, 

Sendich & Smith, 9/26/13

GI Baseline for AEO2013 GI Baseline for AEO2014

AEO2014 Prelim AEO2013

Source: ref2014.d092013a; *most of mining is done in other modules so it is not included

200

250

300

350

400

Agriculture

750

1,000

1,250

1,500

1,750

2,000

Construction

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