US business productivity grew swiftly in the third quarter and factory orders rebounded in October, the government said on Tuesday, suggesting a robust economy with little price pressure outside of energy costs.
Separate reports showed some softening in retail sales after a strong kick-off to the holiday sales season and a drop in pending home sales, the latest sign of moderation in a housing market after a red-hot five-year run.
The Labour Department said nonfarm business productivity advanced at a 4.7 percent annual rate in the third quarter, the swiftest increase in two years. The strong productivity gain pushed unit labour costs - a key gauge of profit and price pressure - down at a 1 percent pace despite a solid 3.7 percent rise in hourly compensation.
"Companies may be paying more for raw materials and energy, but that is at least partially being offset by lower unit labour costs. That, I think, is likely to keep inflation contained," said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis.
Separately, the Commerce Department said new orders at US factories rose 2.2 percent in October after a 1.4 percent September drop, as soaring demand for aircraft offset weakness in cars, computers, metals and electrical equipment. The strong gain in productivity, coupled with a sharp downward revision to second-quarter compensation measures, eased inflation worries on Wall Street, boosting prices for stocks and US government bonds.
The Labour Department said compensation in the second quarter advanced only 0.9 percent, the smallest gain since the final three months of 2002 and well below the 4 percent rise reported just a month ago. The slim pay gain means unit labour costs fell in the quarter, as opposed to rising.
Over the past year, productivity has risen 3.1 percent, with unit labour costs advancing a mild 1.8 percent. The report on factory orders offered a fresh sign of a strengthening at non-auto manufacturers. Demand for durable goods, big-ticket items meant to last at least three years, rose 3.7 percent in October, even as orders for autos fell 1 percent.
The report showed shipments from factories up 1 percent in October, outpacing a 0.6 percent rise in inventories.