By STEVE LIESMAN Staff Reporter of THE WALL STREET JOURNAL Many analysts may have overlooked one of the main drivers of the productivity gains of the past five years: machine tools. The report, which was conducted by Joel Popkin Co. of Washington and will be released Thursday, suggests that consumers have saved billions of dollars over the past five years because of technological, material and process advances in the machines that help make everything from cars to air conditioners to airplanes. Among the conclusions of the study -- conducted for the trade group, the Association for Manufacturing Technology -- advances in machine tools have helped drive down the costs and enhance the quality and energy efficiency of durable goods like refrigerators and automobiles. Flat durable-goods prices between 1996 and 1999 have saved consumers over $101 billion, the study said, while increased productivity in durable-goods manufacturing has added $618 billion to gross domestic product between 1992 and 1998. "Manufacturing has been reinvented," the study said. "This is the result of a combination of factors but fundamentally has been a product of improvements in manufacturing technologies." Greater precision in machine tools, the study argues, has helped cut the energy use of air conditioners by 10% between 1990 and 1997. The major advance was the introduction in the late 1980s of a new kind of compressor whose manufacture required machine tools with a precision down to 10 microns, or 10-millionths of a meter. In part, the productivity gains from machine tools have come from technological breakthroughs. This has been propelled by the move to open architecture, in which a common language is used to program the machines. Because of the programming, machine tools now perform a variety of milling, grinding or cutting operations at one time, reducing the need to stop the machine to change tools, shortening the production cycle and slashing inventories. "It takes less time to produce something and consumers benefit form those products now sooner rather than later," Mr. Popkin said in an interview. Other improvements have come from new materials, such as ceramics, that allow the machine tools to operate at faster speeds, or from new processes, like using lasers to cut materials. While some of the gains are picked up in government statistics, some remain unmeasured. For example, the consumer price index, which measures inflation, might register a price increase for automobile repair. But it would be unable to measure the reduction in money paid to the service stations overall by consumers, because their cars are more reliable and they are making fewer trips to the service stations. In other words, one trip to the service station may cost more, but drivers are making fewer trips. Indeed, one of the principal reasons for more reliable transmissions is that machine tools now finish metals with far greater precision. Such potentially unmeasured gains suggest to Don Carlson, president of the association, that the Federal Reserve could have been mistaken in its recent efforts to raise interest rates. If productivity is higher than measured, then the economy can grow faster than thought without fear of inflation, he said. "There needs to be a recognition that manufacturing and machine tools are driving productivity, and we need to have public policy that recognizes that," he said in an interview. Two academic studies of recent productivity gains have found that more than half of the increase has occurred outside the computers, software and telecommunications sectors. A co-author of one of those studies, Harvard University Professor Dale Jorgenson, said in an interview that Mr. Popkin's work is consistent with his own and other academic studies. Although he hasn't seen the Popkin report, Prof. Jorgenson said that a sizable amount of productivity gains has yet to be explained in the economy and that the manufacturing sector, of which machine tools are a critical part, has probably been a substantial contributor. Write to Steve Liesman at [EMAIL PROTECTED] <mailto:[EMAIL PROTECTED]> _______________________________________________ Crashlist resources: http://website.lineone.net/~resource_base To change your options or unsubscribe go to: http://lists.wwpublish.com/mailman/listinfo/crashlist
