Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 45

Productivity and the Economy The U.S. Bureau of Labor Statistics (www.bls.gov) provides quarterly data for productivity in business, nonfarm business, and manufacturing industries. The Bureau of Labor Statistics also breaks down these data into industry segments. The data for the annual percentage change in productivity for the recent decade is as follows, for the category of business productivity. Capital expenditure data are maintained by the Census Bureau, www.census.gov.

Required Economists argue that the changes in productivity are influenced by changes in the economy, for example, the economic downturn of 2000-2001 as well as the recent recession which started in 2008. Others argue that productivity is most affected by advances in and adoption of information technology, investments in research and development, and capital investment in new plant and equipment (i.e., more highly automated and efficient manufacturing facilities). The preceding data show that productivity was on the decline in the period 2005-2008 and improved again in 2009. In 2009, capital investment was sluggish as was the pace of innovation and adoption of information technology. Based on the preceding information and the data from the Census Bureau, what productivity change would you forecast for 2010 and the following couple of years