The article analyzes productivity growth in manufacturing and services in 40 economies from 1995 to 2009. It finds that Asian economies have shown strong total factor productivity (TFP) growth, with services outpacing manufacturing in some countries. The study introduces a new way to break down TFP growth and reveals that changes in factor requirements are the main drivers of productivity growth differences between services and manufacturing. These changes help counteract the negative impact of a decreasing ratio of value added to gross output.