US: Productivity growth muted in Q1 2018 – Nomura

Analysts at Nomura note that the US nonfarm productivity, real output per hour, increased 0.7% q-o-q saar in Q1 2018, while Q4 2017 was revised up to +0.3%, from 0.0% previously.

Key Quotes

“Nonfarm output increased 2.8%, while nonfarm aggregate hours increased 2.1%. The upward revision to Q4 productivity stemmed from an upwardly revised output figure, consistent with the upward revisions to Q4 GDP growth in the third estimate.”

“Compensation per hour picked up to 3.4% in Q1, consistent with some acceleration in other labor compensation measures such as the employment cost index (ECI). The increase in compensation, combined with the subdued productivity growth reading, kept unit labor costs, the difference between compensation growth and productivity growth, elevated at 2.7%.”

“Looking ahead, some increase in investment as a result of the new tax bill could increase the capital stock on the margin, and hence productivity. However, based on recent survey data, it appears that the recent pickup in capital expenditures could be more related to replacement activity as opposed to expansion.”