Technical Note Output Industry output is measured as sectoral output, the total value, in real terms, of goods and services produced for sale outside the industry. For most manufacturing industries, real output is measured by deflating nominal value of production, but for a few detailed industries within the petroleum refining, cement, iron and steel, and aluminum industries it is measured by physical quantities of output. Industry value of production is derived by adjusting industry shipments for changes in inventories and subtracting intra- industry transfers and resales. 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 are constructed primarily 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. Combined Inputs The index of combined inputs is a Törnqvist index of separate quantity measures of labor, capital, and intermediate purchases inputs. The growth rates of the various inputs are aggregated using their average relative cost shares in industry value of production as weights. The labor weight is based on the total value of labor compensation, including fringe benefits. The intermediate purchases weight is based on the total value of materials (adjusted to remove intra-industry transactions), fuels, electricity, and purchased services. The capital weight is a residual calculated as the value of net production minus the value of labor compensation minus the value of intermediate purchases. Capital Input The measure of capital input is based on the flow of services derived from the stock of physical assets. Physical capital is composed of 26 categories of equipment, 2 categories of structures, 3 categories of inventories, and land. Capital services are estimated by calculating capital stocks; changes in the stocks are assumed to be proportional to changes in capital services for each asset. Capital stocks are calculated using the perpetual inventory method, which takes into account the continual additions to and subtractions from the stock of capital as new investment and retirement of old capital occur. The perpetual inventory method measures stocks at the end of a year equal to a weighted sum of all past investments, where the weights are the asset’s efficiency relative to a new asset. A hyperbolic age- efficiency function is assumed to calculate the relative efficiency of an asset at different ages. Estimates of investment by asset type are derived from annual capital expenditures by industry from the economic censuses and annual surveys of the Bureau of the Census, U.S. Department of Commerce, along with estimates of asset detail by industry from the capital flow tables of the Bureau of Economic Analysis. 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 PPIs) with weights from the BEA capital flow tables that reflect the industry’s use of individual asset commodities. The index of aggregate capital input for each industry is an annually chained Törnqvist quantity index. To construct the index, the growth rates of the stocks of each type of asset are aggregated using weights that are the average of each asset type’s cost share in successive years. The asset costs are estimated by multiplying the asset stocks by implicit rental prices. Labor Input The industry labor input measures represent the hours of all workers in the industry. The primary source of data on employment and hours is the BLS Current Employment Statistics (CES) survey, which provides monthly data on the number of jobs held by wage and salary workers employed directly in nonfarm establishments. The CES survey also provides data on the average weekly hours of production and nonsupervisory workers in these establishments. Data from the BLS Current Population Survey (CPS) are used to supplement the CES data. The Division of Industry Productivity Studies (DIPS) estimates the average weekly hours of nonproduction workers for each industry using data from the CPS together with the CES data. The hours of all workers are treated as homogeneous and are directly aggregated. Intermediate Purchases Input The measures of intermediate purchases input is constructed as a Törnqvist aggregate of separate quantities of materials, services, fuels, and electricity consumed by each industry. Except for electricity, for which direct quantity data are available, quantities are derived by deflating current-dollar values with appropriate price deflators. Nominal values of materials, fuels and electricity and quantities of electricity consumed by each industry are obtained from economic censuses and annual surveys of the Bureau of the Census, U.S. Department of Commerce. Purchased business services are estimated using benchmark input-output tables and other annual industry data from the Bureau of Economic Analysis, U.S, Department of Commerce. To avoid double counting, the materials estimates exclude the value of intra-industry purchases. Estimates of materials purchased from other establishments within the industry are subtracted from the gross measure of materials costs. Constant-dollar materials consumed are derived by dividing annual current-dollar industry purchases by a weighted price deflator for each industry. Materials deflators are constructed for each industry by combining detailed producer price indexes and import price indexes from BLS 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. Annual total fuels consumed by each industry are also deflated with weighted price deflators. Producer price indexes for individual fuel categories are weighted together with weights reflecting detailed fuels expenditures by industry from the Energy Information Administration, U.S. Department of Energy. Additional Information The multifactor productivity measures in this news release include data on industry output, capital expenditures and cost of materials and fuels from the 2005 Annual Survey of Manufactures of the Bureau of the Census, U.S. Department of Commerce, along with data from the 1997 benchmark IO tables and capital flow tables of the Bureau of Economic Analysis, U.S. Department of Commerce. Employment and hours data from the BLS Current Employment Statistics survey reflect the annual benchmark revision published in February 2007. The output and labor input measures included in this release are the same as those used in the labor productivity measures for four-digit manufacturing industries released April 19, 2007. Tables containing multifactor productivity and related indexes for the manufacturing industries included in this release are accessible on the Multifactor Productivity website at http://www.bls.gov/mfp/home.htm. More detailed data and information is available upon request by sending an email to email@example.com or by calling the Division of Industry Productivity Studies (202-691-5618). Material in this report is in the public domain and, with appropriate credit, may be used without permission. Information in this report will be made available to sensory- impaired individuals upon request. Voice phone: 202-691-5618; TDD message referral phone number: 1-800-877-8339.