U.S. Productivity Decreased 2.2% in Q2

Output fell by 3.7%, which was the largest quarterly decline since a 2.5% decrease in the second quarter of 1989.

The Bureau of Labor Statistics of the U.S. Department of Labor reported revised productivity figures for the second quarter of 2008. Overall manufacturing declined 2.2%, with durable goods declining 4.5% and nondurable goods dropping 0.2%.

Output fell by 3.7%, which was the largest quarterly decline since a 2.5% decrease in the second quarter of 1989.

Hour worked decrease 1.5%, but compensation increased 3.9%. Unit labor costs increased 6.2%.

"The economic downturn combined with the increase in foreclosures and sub-primemortgage loan difficulties have reduced the purchasing power of communities,causing a decline in demand for durable goods such as automobiles, electrical appliances and construction machinery. Manufacturers attempts to maintain employment and provide wage increases in an environment of declining sales haveobviously hurt productivity," said Tim Hanley of Deloittes Process and Industrial Products Practice.

"We have found that during this economic downturn, major industrial companies that have often led with investments in new technology, as well as financial and technical services in North America and Europe, are now focusing on right-sizing. Elimination of manufacturing jobs in these firms hasalso resulted in the downsizing of their allied service offerings.

In order to align with the growing global demand and to enhance customer service operations, industrial companies have moved operations to emerging markets. Additionally, to adjust to demand in a lean economy, these companies have continued to restructure their operations in NorthAmerica by following lean manufacturing practices.

To cope with the current economic situation and to continue improving operations, we are now seeing leading industrial companies focus on improving competitiveness and productivity while simultaneously pursuing innovation with both their products and processes and by investing intechnology for enhancing their preparedness for the next upturn insales.

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