US business productivity grew at a 1.6 per cent annual rate in the second quarter, higher than first estimated, the US government said today in a report that also showed labour costs up much more this year than initially thought.
The increase in non-farm business productivity was a touch stronger than the 1.5 per cent gain expected on Wall Street and a quicker advance than the 1.1 per cent the labour department reported a month ago.
The report showed total US productivity, a measure of worker output per hour and the key building block to rising living standards, has risen 2.5 per cent over the past year, a solid increase in line with the gains seen since the mid-1990s.
While some economists have worried US productivity growth might slow, imparting further upward pressure on inflation, Fed Chairman Ben Bernanke said last week the trend seen since the mid-1990s looks likely to stay in place.
However, the report also contained revisions to first quarter data that showed hourly worker compensation shot up at a 13.7 per cent rate, well ahead of the previously reported 6.9 per cent gain.
Those gains helped push labour costs - a gauge of inflation and profit pressures - up 5 per cent over the past year, the largest gain since a matching rise in the period ended in the third quarter of 2000.
"You have a very pronounced acceleration in (unit labor costs) and the people at the Fed who are concerned about entrenched inflation will regard this as a very grave development," said Pierre Ellis, senior economist at Decision Economics in New York.
Still, some economists view the compensation figures that accompany the government's productivity data with some caution, and believe the exercise of stock options - rather than more fundamental pressures stemming from a tight labor market - could be a factor behind the first quarter's out-sized gains.