Overview
In
1998, economic growth in the United States continued on its expansion
path. Between 1994 and 1998, real Gross Domestic Product (GDP)
for manufacturing grew at an annualized rate of 4.7 percent. Producer prices
for intermediate materials used in manufacturing showed very little growth
while producer prices for crude materials actually declined as the real
price (chained 1992 dollars) of crude oil was 23 percent less in 1998
than in1994. Labor costs also showed little growth--2.7 percent annually
(employment cost index) while labor productivity grew by 4.2 percent
(output per hour (all persons)). Between 1994 and 1998, capital
productivity experienced little gain—less than 1 percent annually so the
manufacturing growth seems to have been driven by the increase in labor
productivity and a decrease in the cost of material inputs.
Most of the
growth in the manufacturing sector was in the production of durables such
as primary metals, vehicles, computers, and machinery of all types.
Production of durable goods, as measured by the industrial production
index, rose at an annualized rate of 8.7 percent while nondurables such
as food, clothing, and paper products increased by only an annualized
rate of 1.5 percent.
Interestingly,
between 1994 and 1998, energy use did not keep up with production.
Whether one uses the measure “First Use of Energy,” which includes feedstocks,
or the measure “Fuel Consumption,” energy use grew annually 2.3 and 1.8
percent, respectively. In the past, arguments were heard that energy
was such a small percentage of costs that manufacturers were not as concerned
about the energy costs as they were about their other material inputs.
One could argue that U.S. manufacturing became more energy efficient as
manufacturers, reluctant to raise prices, looked everywhere to cut costs--even
energy. As seen in the 1998 MECS, between 1994 and 1998 many manufacturers
did replace equipment with energy-efficient replacements, and they also
participated in Federal Government programs such as the Industries of
the Future and the Motor and Steam Challenges sponsored by the U.S. Department
of Energy.
Also during
this time, there was a continuation of a structural change in manufacturing—from
energy-intensive manufacturing to less energy intensive. While
the nominal dollar value of durable goods, as measured by value of shipments,
experienced twice the growth as nondurable goods--growth in the value
of the mix within the durable goods sector favored less energy-intensive
goods. As an example, between 1994 and 1998, the less energy-intensive
computer and electronic products industry and the information technologies
industries grew at a faster rate than did the more energy-intensive primary
industries. (U.S. Census Bureau Annual Survey of Manufactures).
1This analysis shows a comparison between the 1994 and 1998 (current) Manufacturing Energy Consumption Surveys.
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