Internet address: http://www.bls.gov/mfp 

Historical, technical USDL 07-0822 

information: (202) 691-5606 For Release: 10:00 AM EDT 

Media contact: (202) 691-5902 Thursday, June 7, 2007 

MULTIFACTOR PRODUCTIVITY TRENDS IN MANUFACTURING, 2005 

The Bureau of Labor Statistics of the U.S. Department of Labor today reported multifactor 

productivity data—output per unit of combined inputs—for the manufacturing sector and for durable 

goods, nondurable goods, and three-digit (NAICS) manufacturing industries for the year 2005. 

In manufacturing, the annual rates of multifactor productivity change for 2005 were: 

3.4 percent in the manufacturing sector and 

3.3 percent in the durable goods manufacturing sector and 

3.2 percent in the nondurable goods manufacturing sector. 

 At 3.4 percent, multifactor productivity growth in the manufacturing sector slowed somewhat 

compared to 2004 (3.8 percent). This was due to a deceleration in durable goods manufacturing 

productivity growth from 4.5 percent to 3.3 percent. A small acceleration in nondurable goods 

manufacturing productivity growth from 2.5 percent to 3.2 percent partially offset the slower growth of 

multifactor productivity in durable goods manufacturing. The 2004-05 annual changes are 

summarized in table A, and further detail and historical measures are shown in tables 1 through 3. 

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. 

The data sources and methods used in the preparation of the manufacturing series differ from 

those used in preparing the private business and private nonfarm business multifactor series and 

therefore the measures are not directly comparable. See BLS News Release USDL 07-0758, 

Preliminary Multifactor Productivity Trends, 2006 for information on multifactor productivity 

measurement in the private business and private nonfarm business sectors. 
Table A. Compound average annual rates of growth for multifactor productivity, output per 

hour of all persons, output per unit of capital services, and related measures in the 

manufacturing sector for selected periods, 1987 to 2005 

 1987-05 1987-90 1990-95 1995-00 2000-05 2004-05 

Productivity

 Multifactor productivity1 1.6 0.2 1.2 2.0 2.5 3.4 

 Output per hour of all persons 3.7 1.7 3.4 4.7 4.3 4.7 

 Output per unit of capital services 0.2 -0.1 0.6 0.4 -0.1 3.9 

 

Sectoral Output 2.5 2.1 3.3 4.5 0.1 3.5 

Inputs

 Hours2 -1.2 0.4 -0.1 -0.2 -4.1 -1.1 

 Capital services 2.3 2.2 2.7 4.1 0.1 -0.3 

 Energy -1.3 1.9 1.6 -2.5 -4.7 -3.3 

 Non-energy materials 1.8 1.6 3.6 4.9 -2.9 1.0 

 Purchased business services 2.2 5.4 3.0 2.4 -0.7 1.3 

 Combined inputs3 0.9 2.0 2.1 2.4 -2.4 0.1 

1. Output per unit of combined hours, capital, energy, materials, and business services inputs. 

2. Hours at work of all persons. 

3. The growth rate of each input is weighted by its share of nominal costs. 

Manufacturing sector 

Multifactor productivity in the manufacturing sector rose 3.4 percent in 2005 (see table A). This 

is the fourth consecutive year that multifactor productivity rose in manufacturing (see table 2). The 

multifactor productivity gain in 2005 reflected a 3.5 percent increase in sectoral output and a 0.1 

percent increase in combined inputs, which, while modest, was the first increase since 1999. Capital 

services declined 0.3 percent in 2005, after having also declined in 2004. Hours declined 1.1 percent 

in 2005, materials rose 1.0 percent and purchased business services rose 1.3 percent. 
Historical trends in manufacturing 

Labor productivity (output per hour worked) differs from multifactor productivity (output per 

unit of combined inputs) in the treatment of both capital and intermediate inputs (energy, materials, 

and business services). Labor productivity measures do not explicitly account for the effects of capital 

nor do they account for changes in the effects of intermediate inputs on output growth. As a result, 

changes in input intensity (the input-hours ratio) can influence labor productivity growth. In contrast, 

multifactor productivity treats capital and intermediate inputs as explicit factors of production and, 

therefore, is net of changes in input intensity. Historical trends in labor productivity growth can be 

viewed as the sum of five components: multifactor productivity growth, and the contribution of the 

intensity of the following inputs: capital, energy, materials, and business services (see table B). 

The contribution of input intensity equals the change in the input-hours ratio multiplied by the 

input's cost share. Historically the labor share is about a third of total cost, the capital share about a 

sixth, the materials share a little over a fourth of total cost, and the business services share a little less 

than a fourth. The energy share is historically only about 3 percent of total cost. 

Multifactor productivity in manufacturing grew 1.6 percent annually between 1987 (the starting 

point of the series) and 2005 (see table A). Sectoral output increased at a 2.5 percent annual rate over 

the period, and combined inputs rose an average of 0.9 percent per year. Of the 3.7 percent growth 

rate in output per hour (labor productivity), 1.6 percent can be attributed to increases in multifactor 

productivity, 0.6 percent to the contribution of capital intensity, 0.8 percent to changes in materials 

intensity, and 0.7 percent to changes in business services intensity (see table B). The remaining input, 

energy, was a very small share of total inputs; therefore, it made no discernable contribution to output 

per hour. 

From 1995 to 2000, multifactor productivity in manufacturing accelerated more rapidly than in 

previous periods, averaging growth of 2.0 percent per year. Sectoral output growth increased to an 

average of 4.5 percent per year (see table A), while combined inputs advanced at an average of 2.4 

percent per year, a slightly higher rate than in the early 1990s. In the 2000-2005 period, multifactor 

productivity growth increased faster than in the 1995-2000 period, averaging growth of 2.5 percent per 

year. Labor productivity slowed to a still-robust average annual growth rate of 4.3 percent per year. 

The contribution of capital intensity growth was unchanged in the 2000-2005 period from the 1995-

2000 period, growing at an average annual rate of 0.7 percent (table B). The contribution of other 

capital services rose 0.5 percent during the 2000-2005 period, while the contribution of information 

processing equipment grew 0.2 percent. The contribution of materials dropped to an average growth 

rate of 0.3 percent from 1.4 percent in the 1995-2000 period, while the contribution of business 

services intensity accelerated slightly, averaging 0.8 percent. 

Among detailed manufacturing industries, most durable goods and nondurable goods industry 

groups experienced multifactor productivity gains in 2005 (see table 3). The exceptions were 

petroleum and coal products, and furniture and related products. In these two industries multifactor 

productivity growth declined in 2005. The manufacturing industries that showed the largest 

multifactor productivity growth in 2005 were textile mills and textile product mills, which increased 

9.7 percent, and printing and related support activities, with an 8.7 percent increase. 
Table B. Compound average annual rates of growth in output per hour of all persons and 

the contributions of capital intensity, labor composition, and multifactor productivity, 

manufacturing sector, 1987 to 2005 

1987-05 1987-90 1990-95 1995-00 2000-05 2004-05 

Manufacturing

Output per hour of all persons 3.7 1.7 3.4 4.7 4.3 4.7 

Contribution of capital intensity1 0.6 0.3 0.4 0.7 0.7 0.1 

Contribution of information 0.2 0.1 0.2 0.4 0.2 0.0 

processing equipment and 

software2

Contribution of all other capital 

services 

0.3 0.1 0.2 0.4 0.5 0.0 

Contribution of energy intensity3 0.0 0.0 0.0 -0.1 0.0 -0.1 

Contribution of materials intensity4 0.8 0.3 1.0 1.4 0.3 0.6 

Contribution of business services 0.7 0.9 0.6 0.6 0.8 0.5 

intensity5

Multifactor productivity6 1.6 0.2 1.2 2.0 2.5 3.4 

1. Growth rate in capital services per hour multiplied by capital's share of current dollar costs. 

2. Growth rate of information processing equipment and software per hour multiplied by its share of total costs. 

3. Growth rate in energy services per hour multiplied by energy’s share of current dollar costs. 

4. Growth rate in materials services per hour multiplied by materials’ share of current dollar costs. 

5. Growth rate in business services per hour multiplied by business services’ share of current dollar costs. 

6. Output per unit of combined inputs. 

Over the full 1987-2005 period, multifactor productivity advanced most rapidly in the computer 

and electronic products industry. This industry’s 9.6-percent average annual growth rate during this 

period is 7.8 percentage points higher than the industry with the next highest growth rate, textile mills 

and textile product mills. In the 1995-2000 period, multifactor productivity grew very rapidly in the 

computer and electronic products industry, 15.8 percent per year. In the 2000-2005 period, the growth 

rate slowed to 6.3 percent. Three industries experienced a decline in multifactor productivity over the 

1987-2005 period: food, beverage and tobacco products; machinery; and electrical equipment, 

appliances and components. 
Summary of Methods for the manufacturing sector and manufacturing industries 

The manufacturing multifactor productivity measures describe the relationship between output in 

real terms and the inputs involved in its production. They do not measure the specific contributions of 

labor, capital, or any other factor of production. Rather, multifactor productivity is designed to 

measure the joint influences on economic growth of technological change, efficiency improvements, 

returns to scale, reallocation of resources due to shifts in factor inputs across industries, and other 

factors. The multifactor productivity indexes are derived by dividing an output index by an index of 

the combined input of labor, capital services, energy, non-energy materials, and business service 

inputs. 

The multifactor productivity measures for manufacturing differ in several ways from those for 

private business and private nonfarm business in their treatment of labor input, output, and classes of 

factor inputs. First, the manufacturing measure of labor input is a direct aggregate of hours. This is in 

contrast to the major sector measures for which estimates of the effects of changing labor composition 

have been developed. 

Next, the output concept used for multifactor productivity in manufacturing is “sectoral output.” 

Sectoral output is similar to gross output, but excludes shipments from one establishment to another 

within the same manufacturing industry or sector. In contrast, the output concept used for private 

business and nonfarm business is “gross product originating”. Gross product originating in private 

business equals gross domestic product in the economy less general government, government 

enterprises, private households (including the rental value of owner-occupied real estate), and nonprofit institutions. Gross product originating excludes intermediate transactions between businesses. 

The output index for manufacturing is computed using a chained superlative index (Tornqvist) 

of 3-digit NAICS industry outputs. Industry output is measured as sectoral output, the total value of 

goods and services leaving the industry. Wherever possible, the indexes of industry output are 

calculated with a Törnqvist formula. This formula aggregates the growth rates of the various industry 

outputs between two periods, using their relative shares in industry value of production averaged over 

the two periods, as weights. Industry output measures for manufacturing industries are constructed 

using data from the economic censuses and annual surveys of the Bureau of the Census, U.S. 

Department of Commerce, together with information on price changes, primarily from BLS. 

 The resulting manufacturing multifactor productivity measure compares what is produced in the 

manufacturing sector for use outside of manufacturing with the inputs used in the manufacturing 

process obtained from outside of manufacturing. The comparison excludes flows of intermediate 

inputs between manufacturing establishments from measures of both output and inputs. However, the 

comparison does include capital service inputs and capital goods produced, even when these goods are 

produced and consumed in manufacturing. 

Multifactor productivity in manufacturing compares "sectoral output" to three classes of inputs: 

1) hours at work of labor employed within manufacturing; 2) capital services employed by 

manufacturing establishments; and 3) purchases of energy, materials, and business services from 

outside of manufacturing (intermediates). 
Hours paid of production workers are largely obtained from the Current Employment Statistics 

(CES) survey. These hours of employees are then converted to an at-work basis by using information 

from the Employment Cost Index (ECI) of the National Compensation Survey (NCS) and the Hours at 

Work Survey. Hours at work for nonproduction workers are derived using data from the Current 

Population Survey (CPS), the CES, and the NCS. The hours at work of proprietors are derived from 

the CPS. Hours at work data reflect Productivity and Costs data as of the March 6, 2007 news release. 

Therefore, it does reflect benchmark revisions to the CES survey and other revisions to hours released 

on February 2, 2007. The construction of hours at work follows the methods used in the private 

business sector described in USDL 07-0758, Preliminary Multifactor Productivity Trends, 2006, 

http://www.bls.gov/news.release/pdf/prod3.pdf, except that hours in manufacturing are directly 

aggregated and do not include the effects of changing labor composition. 

Capital input measures the services derived from the stock of physical assets and software. The 

assets included are fixed business equipment, structures, inventories, and land. Among equipment, 

BLS provides additional detail for information processing equipment and software (IPES). IPES is 

composed of four broad classes of assets: computers and related equipment, software, communications 

equipment, and other IPES equipment. Computers and related equipment includes mainframe 

computers, personal computers, printers, terminals, tape drives, storage devices, and integrated 

systems. Software is comprised of pre-packaged, custom, and own-account software. 

Communications equipment is not further differentiated. Other IPES includes medical equipment and 

related instruments, electromedical instruments, nonmedical instruments, photocopying and related 

equipment, and office and accounting machinery. 

The aggregate capital input measures are obtained by Tornqvist aggregation of the capital stocks 

for each asset type within each of the eighteen manufacturing NAICS industry groupings using 

estimated rental prices for each asset type. Each rental price reflects the nominal rate of return to all 

assets within the industry and rates of economic depreciation and revaluation for the specific asset; 

rental prices are adjusted for the effects of taxes. Data on investments in physical assets and software 

are obtained from BEA. Nonfarm industry detail for land is based on IRS book value data. Currentdollar gross product originating (GPO) data, obtained from BEA, are used in estimating capital rental 

prices. 

In manufacturing, intermediates are the largest input in terms of costs. Furthermore, research has 

shown that substitution among inputs, including intermediates, affects productivity change. Therefore, 

it is important to include intermediates in productivity measures at the level of manufacturing. In 

contrast, the more aggregate productivity measures compare "value-added" output with two classes of 

inputs, capital and labor. Because of these differences in methods, productivity change in 

manufacturing cannot be directly compared with changes in private business or private nonfarm 

business. 

Intermediate inputs (energy, materials, and purchased business services) are obtained from 

BEA based on BEA annual input-output tables. Tornqvist indexes of each of these three input classes 

are derived at the 3-digit NAICS level and then aggregated to total manufacturing. As with the 

sectoral output measures, materials inputs are adjusted to exclude transactions between establishments 

within the same sector. 
The five input indexes (capital services, hours, energy, materials, and purchased business 

services) are combined using Tornqvist aggregation, employing weights that represent each 

component's share of total costs. Total costs are defined as the value of manufacturing sectoral output. 

The index uses changing weights: The share in each year is averaged with the preceding year's share. 

Multifactor productivity data for the 1987-2005 period reflect a number of changes in source 

data. For example, current NAICS input-output tables and revised BEA chain-type price and indexes 

for intermediate inputs (energy, materials, and business services), (see tables at 

http://www.bea.gov/Industry/Index.htm , Gross Domestic Product by Industry) have been 

incorporated. 

BLS built multifactor productivity measures from three-digit NAICS detail. Most of the critical 

data used to calculate these measures were not reported on a NAICS basis for years prior to 1998. 

Detailed GDP by industry data were available from 1998 forward but from 1987 to1997 many of the 

income components needed to construct capital rental prices were obtained by applying 1997 SIC-toNAICS conversion factors to SIC data and adjusting to the estimated NAICS totals. A similar 

procedure was applied to manufacturing inventories, energy, materials, and business services. Land 

data were only available from 1998 to 2003 on a NAICS basis. As a consequence, land estimates from 

1987 to 1997 were calculated using a combination of SIC to NAICS conversion factors and more 

detailed IRS data. Data for 2004 and 2005 were extrapolated using detailed IRS data for 2002. 

Comprehensive tables containing additional data beyond the scope of this press release are 

available upon request at 202-691-5606 or at http://www.bls.gov/mfp/mprdload.htm . More detailed 

information on methods, limitations, and data sources of capital and labor are provided in BLS Bulletin 

2178 (September 1983), "Trends in Multifactor Productivity, 1948-81." Methods for measuring 

manufacturing multifactor productivity are discussed in "Measurement of productivity growth in U.S. 

manufacturing” in the July 1995 issue of the Monthly Labor Review (see 

http://www.bls.gov/mfp/mprgul95.pdf ). Additional data not contained in the release can be obtained 

in print at 202-691-5606 or at http://www.bls.gov/mfp . 
Table 1. Manufacturing Sector: Productivity and related measures, 1987-2005

Indexes 

(2000=100) 

 Productivity Inputs 

Output per Output Purchased Combined 

hour of all per unit Multifactor Sectoral Capital business units of all 

Year persons of capital Productivity1 Output2 Hours3 Services4 Energy Materials services Inputs5

1987 63.9 95.4 84.8 64.1 100.3 67.2 99.3 62.9 65.3 75.6 

1988 65.2 98.7 86.3 67.4 103.4 68.3 103.3 63.8 71.0 78.1 

1989 65.9 98.2 85.8 68.5 104.0 69.8 103.0 65.1 75.3 79.9 

1990 67.3 95.2 85.2 68.3 101.5 71.7 105.2 66.0 76.6 80.1 

1991 69.1 91.5 85.0 67.1 97.2 73.4 104.8 65.6 76.0 79.0 

1992 71.7 92.3 84.5 69.4 96.7 75.1 103.8 71.3 81.5 82.1 

1993 73.5 93.6 86.7 72.1 98.0 77.0 107.1 71.9 81.7 83.1 

1994 76.1 96.6 89.0 76.4 100.3 79.0 110.4 74.8 84.7 85.8 

1995 79.4 98.2 90.6 80.4 101.2 81.8 113.7 78.8 88.9 88.7 

1996 82.4 97.6 91.0 83.1 100.8 85.2 110.3 86.0 88.5 91.3 

1997 86.9 100.2 93.6 89.2 102.6 89.0 108.2 92.9 92.1 95.3 

1998 91.7 100.5 95.8 93.8 102.3 93.4 105.4 97.7 95.0 98.0 

1999 95.8 100.3 96.5 97.4 101.6 97.1 105.5 102.6 100.0 100.9 

2000 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

2001 101.5 93.6 98.7 94.9 93.5 101.4 90.6 93.3 100.7 96.2 

2002 108.6 92.5 102.4 94.3 86.8 101.9 89.3 88.3 98.2 92.1 

2003 115.3 93.5 105.3 95.2 82.6 101.8 84.4 87.7 99.1 90.5 

2004 117.9 95.9 109.2 96.9 82.2 101.1 81.1 85.5 95.2 88.7 

2005 123.4 99.6 113.0 100.3 81.3 100.7 78.5 86.3 96.5 88.8 

See footnotes following table 2. Source: Bureau of Labor Statistics 
Table 2. Manufacturing Sector: Productivity and related measures, 1988-2005

Percent change 

 Productivity Inputs 

Output per Output Purchased Combined 

hour of all per unit Multifactor Sectoral Capital business units of all 

Year persons of capital Productivity1 Output2 Hours3 Services4 Energy Materials services Inputs5

1988 2.1 3.4 1.7 5.2 3.1 1.7 4.0 1.4 8.7 3.4 

1989 1.0 -0.6 -0.5 1.6 0.6 2.2 -0.3 2.0 6.0 2.2 

1990 2.2 -3.0 -0.7 -0.3 -2.4 2.7 2.1 1.4 1.7 0.4 

1991 2.6 -3.9 -0.3 -1.7 -4.2 2.3 -0.4 -0.6 -0.7 -1.4 

1992 3.9 0.9 -0.6 3.3 -0.5 2.4 -0.9 8.7 7.2 4.0 

1993 2.5 1.4 2.6 3.9 1.4 2.4 3.2 0.9 0.3 1.2 

1994 3.5 3.2 2.7 5.9 2.4 2.7 3.1 3.9 3.8 3.2 

1995 4.3 1.6 1.7 5.2 0.9 3.6 3.0 5.4 4.9 3.4 

1996 3.9 -0.6 0.5 3.4 -0.4 4.0 -3.0 9.2 -0.4 2.9 

1997 5.4 2.7 2.8 7.4 1.8 4.5 -1.9 8.0 4.0 4.4 

1998 5.5 0.2 2.3 5.2 -0.3 4.9 -2.7 5.2 3.2 2.8 

1999 4.4 -0.2 0.8 3.8 -0.6 4.0 0.1 5.0 5.3 3.0 

2000 4.4 -0.3 3.6 2.7 -1.6 3.0 -5.2 -2.6 0.0 -0.8 

2001 1.5 -6.4 -1.3 -5.1 -6.5 1.4 -9.4 -6.7 0.7 -3.8 

2002 6.9 -1.1 3.8 -0.7 -7.1 0.5 -1.5 -5.3 -2.5 -4.3 

2003 6.2 1.0 2.8 1.0 -4.9 0.0 -5.5 -0.8 0.9 -1.8 

2004 2.3 2.6 3.8 1.8 -0.5 -0.8 -3.9 -2.5 -3.9 -2.0 

2005 4.7 3.9 3.4 3.5 -1.1 -0.3 -3.3 1.0 1.3 0.1 

See footnotes following table 2. Source: Bureau of Labor Statistics 
Footnotes, Tables 1-2 

Source: Output data are from the Bureau of the Census, U.S. Department of Commerce, and modified 

by the Bureau of Labor Statistics (BLS), U.S. Department of Labor. Compensation and hours data are 

from BLS. Capital measures are based on data supplied by BEA. See also Summary of Methods in 

this release. 

(1) Sectoral output per combined units of capital, hours, energy, non-energy materials, 

 and purchased business services. 

(2) Manufacturing gross output excluding transactions between manufacturing 

 establishments, superlative chained index. 

(3) Hours at work of all persons. 

(4) A measure of the flow of capital services used in the sector. 

(5) Combined units of capital services, hours, energy, non-energy materials, and 

 purchased business services, superlative chained index. 
Table 3. Compound average annual rates of growth in the multifactor productivity measures for 

manufacturing industries in selected periods. 1987-2005 

Average annual growth rates 

Industry 1987-05 1987-90 1990-95 1995-00 2000-05 2004-05 

Manufacturing 1.6 0.2 1.2 2.0 2.5 3.4 

Nondurable manufacturing 0.6 -0.6 0.7 - 0.3 2.0 3.2 

Food, beverage, and tobacco products -0.1 -1.7 1.6 - 1.8 1.0 4.5 

Textile mills and textile product mills 1.8 0.9 0.7 1.4 3.7 9.7 

Apparel, leather, and allied products 1.3 0.1 2.8 0.7 1.1 0.0 

 

Paper products 0.6 -0.4 -0.1 0.2 2.2 3.1 

Printing and related support activities 0.8 0.6 -0.4 0.4 2.7 8.5 

Petroleum and coal products 0.3 -0.1 0.6 0.3 0.3 -4.8 

Chemicals products 0.4 -0.8 -0.8 0.0 2.9 5.4 

Plastics and rubber products 1.0 0.7 0.6 1.3 1.2 0.1 

Durable manufacturing 2.3 0.8 1.6 3.6 2.7 3.3 

Wood products 0.4 1.0 -1.3 0.1 2.1 4.2 

Nonmetallic mineral products 0.9 0.3 1.0 0.9 1.2 0.6 

Primary metals 1.1 1.1 0.1 0.5 2.6 2.1 

Fabricated metal products 0.8 -0.1 1.0 0.1 1.8 4.6 

Machinery -0.1 1.0 -1.8 -0.7 1.6 1.6 

Computer and electronic products 9.6 5.6 9.5 15.8 6.3 5.7 

Electrical equipment, appliances, and components -0.7 -2.2 -1.9 -1.1 1.6 1.0 

Transportation equipment 0.1 -1.7 -0.3 0.3 1.2 1.8 

Furniture and related products 0.6 -0.8 0.6 0.7 1.4 -1.5 

Miscellaneous manufacturing 1.7 2.4 0.3 1.9 2.6 5.8 

Note: Multifactor productivity measures by industry are not directly comparable to measures for aggregate 

manufacturing because industry measures exclude transactions only within the specific industry while the 

aggregate manufacturing measures also exclude transactions between all manufacturing industries.