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US Q1 productivity rise fastest since 2014; labour costs fall
[WASHINGTON] US worker productivity increased at its fastest pace in more than four years in the first quarter, depressing labour costs and suggesting inflation could remain benign for a while.
The Labour Department said on Thursday nonfarm productivity, which measures hourly output per worker, increased at a 3.6 per cent annualised rate in the last quarter. That was the strongest pace since the third quarter of 2014.
Data for the fourth quarter was revised down to show productivity rising at a pace of 1.3 per cent instead of the previously reported 1.9 per cent rate.
Economists polled by Reuters had forecast first-quarter productivity would advance at a 2.2 per cent rate.
The acceleration in productivity was flagged by a surge in gross domestic product growth in the January-March period.
The economy grew at a 3.2 per cent rate in the first three months of the year after expanding at a 2.2 per cent pace in the fourth quarter.
The trend in productivity is improving. Compared to the first quarter of 2018, productivity increased at a rate of 2.4 per cent, the best performance since the third quarter of 2010.
The strong pace of productivity suppressed growth in labor costs, a potential boost to corporate profits. Unit labour costs, the price of labour per single unit of output, fell at a 0.9 per cent rate in the first quarter after increasing at a 2.5 per cent rate in the prior quarter.
Compared to the first quarter of 2018, labour costs grew at a 0.1 per cent rate, the weakest pace since the fourth quarter of 2013. Weak unit labour costs came on the heels of a report on Tuesday showing wages increasing steadily in the first quarter despite a tightening labour market.
The Federal Reserve on Wednesday held interest rates steady and signaled little desire to adjust them anytime soon. Fed Chairman Jerome Powell told reporters the moderation in price pressures was likely due to transient factors, and predicted inflation would rise back to the US central bank's 2 per cent target. A key inflation measure tracked by the Fed increased 1.6 per cent in the year to March, the smallest gain in 14 months.
In the first quarter, hourly compensation increased at a 2.6 per cent rate, slowing from the fourth quarter's brisk 3.9 per cent pace. Hourly compensation increased at a 2.5 per cent rate compared to the first quarter of 2018.