US non-farm business productivity fell less sharply in the fourth quarter than first thought, the government said on Tuesday in a report showing the lingering effects of Gulf Coast hurricanes.
Worker output per hour fell at a 0.5 percent annual rate in the final three months of 2005, the first drop in nearly five years, the Labour Department said. That was a slight improvement from the 0.6 percent drop reported a month ago.
While Wall Street analysts had expected an even bigger upward revision to a 0.1 percent decline, economists shrugged off the drop in productivity as an inevitable - and only temporary - the result of the devastating 2005 hurricane season, which sapped production and drove up energy costs.
Fourth-quarter growth in gross domestic product was similarly sideswiped by the storms, dropping to just a 1.6 percent annual rate, and early data suggest economic growth has bounced back strongly in the first quarter.
"First-quarter real GDP growth is projected to be an annualised 4.6 percent. As a result, we expect to see a solid rebound in productivity growth and a slowdown in unit labour costs," said Bank of America economist Gary Bigg.
Brian Bethune, US economist at Global Insight, agreed. He said productivity growth is expected to rebound to a 3.8 percent annual rate in the first quarter.
Unit labour costs - a key gauge of profit and price pressure - rose at a 3.3 percent annual rate in the fourth quarter, the report showed. That was down from an initially reported 3.5 percent rise, but analysts on Wall Street had expected an even bigger downward revision, to 3.1 percent.
While the increase in unit labour costs, which measures the cost of labour associated with any given unit of production, was the sharpest in a year, economists said cost increases remained relatively contained below the inflation rate.
For 2005 as a whole, productivity grew 2.9 percent, down from 3.4 percent growth in 2004 and the smallest increase since 2001. Productivity tends to slow as an economic expansion lengthens and employers have squeezed as much efficiency as possible from their existing workforce and technology.
Separate reports showed mixed results at US chain stores last week.
Sales ticked up 0.2 percent last week after rising 1.5 percent in the prior week, and were up 4.3 percent compared with the same week a year earlier, according to a report produced by the International Council of Shopping Centers and UBS Securities LLC.
But independent company Redbook Research said sales at major retailers so far in March were down 2.5 percent when compared with the same period in February. Sales were up 2.4 percent last week compared with the same week a year ago.