The 2.3% U.S. Q2 productivity growth pace beat estimates
The 2.3% U.S. Q2 productivity growth pace beat estimates after a 3.5% (was 3.4%) Q1 pace, with net upward revisions over prior years that reflect upward annual GDP revisions in the July report. Analysts saw Q2 BLS output growth of 1.9% after an unrevised 3.9% Q1 pace, but upward revisions in prior years. Productivity growth has accelerated since the 2015-16 GDP growth lull, and is poised for growth in the 2.0% area in 2019 on a Q4/Q4 basis from 1.0% (was 1.3%) in 2018, 1.3% (was 1.2%) in 2017, and 1.2% (was 0.2%) in 2016. The y/y growth rate for productivity rose to 1.8% in Q2 from 1.7% (was 2.4%) in Q1. Output growth fell to 2.6% y/y in Q1 from 3.2% (was 3.9%), while hours-worked growth fell to 0.8% y/y in Q1 from 1.5%. Analysts saw y/y growth in hourly compensation of 4.3% in Q2 after a 3.2% (was 1.5%) Q1 clip, leaving a bounce in unit labor cost growth to 2.5% in Q2 from 1.5% (was -0.8%) in Q1. For our Q3 productivity forecasts, analysts expect a 1.1% growth rate that undershoots the 1.7% average pace since the start of the last expansion in Q4 of 2001. For components, analysts expect Q3 growth of 2.5% for output, 1.4% for hours-worked, 3.4% for compensation, and 2.3% for unit labor costs.