<--U.S.Economy> What inflation? What interest rate hike? Must read.
stock bull:
Don't anyone believe those fear mongering pundits (who is trying to spook the little guys so they can pick them goods stock on the cheap),there is no evidence of either happening any time soon, given below are couple of good reasons why this is so.
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Top Financial News
Tue, 09 Feb 1999, 1:43pm EST
U.S. Non-Farm Productivity Accelerated in 4th Qtr at Fastest Pace in 3 Yrs
)
(Adds analyst's quote in paragraph 2, data on 1998
productivity in paragraph 4 and markets in paragraph 6.)
Washington, Feb. 9 (Bloomberg) -- U.S. worker productivity
accelerated at the fastest pace in almost three years in the
fourth quarter as the economy expanded at a rapid pace and
inflation barely budged, government figures showed.
''The capital spending boom of the 1990s is at last having a
big payoff,'' said Kenneth Mayland, chief economist at KeyCorp in
Cleveland, Ohio. Increased productivity is ''our answer to cheap
labor costs abroad. This will keep us in the game.''
Non-farm productivity -- calculated as an index of worker
output per hour -- rose at a 3.7 percent annual rate after rising
at a revised 2.5 percent rate in the third quarter, the Labor
Department said.
For all of last year, productivity increased 2.2 percent,
faster than the 1.2 percent gain in 1997 and double the 1.1
percent yearly average for the first seven years of this decade,
according to Bloomberg analytics.
Productivity advances suggest ''the economy can grow faster
with less inflation,'' allowing companies such as AT&T Corp. and
Ford Motor Co. to build sales and bolster profits even as prices
fall, said Robert Dederick, an economic consultant at the
Northern Trust Co. in Chicago.
The U.S. Treasury's benchmark 30-year bond held earlier
gains after the report, with its yield up almost 4 basis points
to 5.31 percent.
Booming Economy
The fourth-quarter rise in productivity wasn't entirely a
surprise, given the pace at which the economy grew. U.S. gross
domestic product expanded at a 5.6 percent annual rate in the
fourth quarter of last year, driven by consumer spending and a
strong labor market. Inflation, meantime, was tame.
The current economic expansion in December became the
longest in U.S. peacetime, passing the 92-month Reagan-era boom,
even as other nations' economies faltered. That helps explain why
the Fed's policy-setting Federal Open Market Committee kept the
overnight bank lending rate at 4.75 percent, where it's been
since November -- after a series of three cuts aimed at
stabilizing financial markets.
Gains in productivity are crucial to businesses if they want
to absorb rising labor costs and hold down the prices they charge
to stay competitive.
In recent testimony to Congress, Federal Reserve Chairman
Alan Greenspan said: ''Improved productivity probably explains
why the American economy has done so well.'' Businesses ''use
both domestic saving and imported financial capital in a highly
efficient manner, apparently more efficiently than many, if not
most, other major industrial countries,'' Greenspan said.
Labor Costs
Fourth quarter productivity was the highest since a 4.2
percent increase in the first quarter 1996. Analysts expected a
4.1 percent increase in the fourth quarter.
Unit labor costs -- a separate index measuring changes in
worker compensation and productivity -- fell at a 0.2 percent
annual rate in the fourth quarter after increasing at a revised
1.4 percent rate in the third quarter. That was the first decline
since a 1.5 percent decline in the first quarter of 1996.
Hourly wages adjusted for inflation, meanwhile, rose at a
1.5 percent annual rate in the fourth quarter after increasing in
the third quarter at a 2.1 percent rate.
The implicit price deflator -- a measure of inflation tied
to the productivity report -- rose at a 0.3 percent rate in the
fourth quarter after increasing at a 0.7 percent rate during the
third quarter.
Total worker output rose at a 6.8 percent rate in the fourth
quarter after increasing at a revised 4.0 percent rate in the
third quarter. The number of hours worked rose at a 3.0 percent
rate after increasing at a revised 1.4 percent rate.
Additionally, unit non-labor payments, which include such
items as taxes and rental payments, rose at a 1.1 percent rate in
the fourth quarter after decreasing at a 0.5 percent rate in
during the third quarter.
The third quarter was initially reported as a 3.0 percent
gain.
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