Economic Report Summary: Quarterly Rebound in Productivity

by: Tim Iacono

Following is a summary of last week's economic reports. In a week very thin on news about the economy, rising quarterly productivity was about the only highlight. For the week, the S&P 500 Index declined 0.7 percent to 1,438 and the yield of the 10-year U.S. Treasury note fell 4 basis points to 4.78 percent.

ISM Services Index: The non-manufacturing index from the Institute for Supply Management rose from a downwardly revised 56.7 in December to 59.0 in January. Shrinking inventories, a sign of healthy consumer spending, was the primary contributor to the monthly increase that now puts the index at a nine-month high. The services index is faring much better than the manufacturing index from the ISM - as indicated a week ago, the manufacturing index now shows contraction during two of the last three months.

Productivity and Labor Costs:
Productivity in the fourth quarter rose at its fastest pace since the first quarter of 2006, up 3.0 percent after a downwardly revised 0.1 percent decline in the third quarter. Labor costs rose less than expected, up 1.7 percent after an upwardly revised 3.2 percent increase in the third quarter.

For all of 2006, unit labor costs rose 2.8 percent while productivity increased 2.1 percent. The productivity gain last year was the weakest showing since 1997, causing concern over the long-term trend in this important statistic.

Consumer Credit: Consumer credit rose by $6.0 billion in December following an upwardly revised total of $13.7 billion in November. The December increase breaks down as $5.4 billion in nonrevolving credit (e.g., automobile purchases) and $0.6 billion in revolving credit (e.g., credit card use).

Summary: This was one of the lightest weeks for economic news in recent memory. Except for the quarterly rebound in productivity amid slowing annual gains, it was also one of the most uneventful as well.

The Week Ahead

The week ahead offers a full slate of economic data highlighted by two reports on housing - the homebuilders' housing market index on Thursday and housing starts on Friday. Also on tap are reports on international trade on Tuesday, retail sales and business inventories on Wednesday, industrial production and two regional manufacturing reports on Thursday, and wholesale prices on Friday.

Chart courtesy of Northern Trust.