AUTOMOTIVE

The Conference Board report provides comparable worldwide measures of productivity, a powerful indicator of economic efficiency. Labor productivity, which measures how much output is obtained for each hour of work, determines a nation's living standards (as measured by per capita income). The more hours people work and the higher the level of productivity, the higher is per capita income. The European Union will get a strong economic boost when ten new members join in May 2004. These countries -- the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia -- have registered strong productivity growth (averaging 4.2%) over the last eight years. Continued structural reforms in these countries will spur continued productivity gains. The current 15-member European Union showed productivity growth of only 0.8% last year, down from 0.9% in both 2001 and 2002. The total number of working hours remained flat last year after showing positive gains in previous years. WHY THE U.S. IS LEADING "The U.S. has outpaced Europe in productivity growth by profitably exploiting new information and communication technologies," says Robert McGuckin, Director of Economic Research at The Conference Board and a co-author of the report. "This is especially true in the trade and financial sectors. Although real investment in information and communication technologies in Europe has grown about as fast as in the U.S., Europe is starting from a much smaller base. The lack of a fully integrated EU market also makes it more difficult to take advantage of new market opportunities." Although eight European nations show higher productivity levels than the U.S., only tiny Luxembourg has been able to translate its high productivity into higher per capita income. That's because countries in the EU have smaller proportions of their population employed and those employed work fewer hours than in the U.S. Despite the projected productivity growth gains for the European Union, catching up with the U.S. is a strong challenge. "The continuation of slow productivity and employment growth means that the European Union is still not providing the sustained solid growth needed to lead global prosperity," concludes The Conference Board report. THE OUTLOOK FOR ECONOMIC GROWTH The Conference Board looks for U.S. economic growth to reach 5.9% this year, with global growth projected at about 5%. While growth is healthy in both Europe and Japan, their growth rates will remain in the 3% range. When the EU adds its ten new members, it will become the world's largest economy. But these 10 countries, which account for about 20% of all employment in the current EU, will briskly raise productivity growth. Says Bart van Ark, Consulting Director for The Conference Board's International Economic Research, and co-author of the report: "Productivity growth in the enlarged European Union will be just slightly below U.S. growth rates. Cost savings on labor and continued restructuring, especially throughout manufacturing, will be the major drivers of new productivity gains."