U.S. Q2 productivity growth upwardly revised from advance estimates

The productivity growth of the U.S. was upwardly revised from the advanced estimate and it continues to show an improvement in momentum in the second quarter as compared to the first quarter. Nonfarm business output per hour was up 1.5 percent quarter-on-quarter.

The upward revision was accounted for mainly by stronger nonfarm business output, which expanded 4 percent and recovered strongly from the first quarter weakness. Employee hours worked were up 2.5 percent, unchanged from the advance estimate. Real compensation per hour was up 2.1 percent, the second quarterly rise following a sharp decline of 7.3 percent in the fourth quarter of 2016. Unit labor costs rose 0.2 percent following a rise of 4.8 percent in the first quarter.

On a year-on-year basis, productivity rose 1.3 percent, just modestly higher from the first quarter. However, this is an improvement from the very slow growth throughout late 2015 and 2016. Despite the recent rebound, trend productivity growth continues to be subdued by historical standards and continues to be outpaced by unit labor costs, noted Barclays in a research report.

Slow growth in output prices, a disappointing productivity trend and rapidly rising unit labor costs have depressed unit profits for firms in recent years and have been one factor preventing wages from picking up at a much rapid rate, according to Barclays.

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