Manufacturing Posts 7.5% Q2 Productivity Gain

By John S. McClenahen In the second quarter of this year, productivity in the manufacturing sector of the U.S. economy posted a seasonally adjusted annual rate of increase of 7.5%, more than two times the 2.9% rate of growth in the overall figure for non-farm businesses, the U.S. Labor Department reported Aug. 10. In manufacturing, output increased 6.6% during the second quarter and hours worked declined 0.9%. The rate of productivity growth was 5.7% among durable goods manufacturers and 10.7% for makers of nondurable goods. The 2.9% rate of productivity growth for the non-farm economy was above the 2% economists generally expected, notes Ron Wexler, an economist at Merrill Lynch & Co., New York. However, "this was the weakest gain in productivity since the fourth quarter of 2002 [and] as a result, unit labor costs rose at a 1.9% rate, its fastest rise since [the second quarter of] 2002," he states. "The acceleration in unit labor costs . . . puts profit margins under some downward pressure and prices possibly under upward pressure," suggests UBS Investment Research, New York.

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