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Tuesday, May 11, 1999 Published at 17:49 GMT 18:49 UK


Business: The Economy

US productivity surge continues

US workers are producing more goods than ever before

A key measure of the strength of the US economy has surged ahead. Productivity grew by 4% in the first quarter of 1999, after growing by 4.3% in the previous quarter - its fastest rate in three decades.

Productivity - which is a measure of how much each worker produces per hour - is widely seen as the key to strong, inflation-free growth.

America's central bank chief Alan Greenspan has attributed the long US economic boom to the growth of productivity - with companies investing more in computers and information technology.

The US economy is now growing at an annual rate of 4.5% a year, but there are no signs of inflationary pressures.

The growth in productivity was much higher than expected by most economists, who had forecast an increase of only 3%.

"(Productivity growth is) much stronger than expected so it suggests the U.S. economy continues to experience a very good supply-side expansion," said Harvinder Kalirai, an economist at IDEA.com.

Back to the l950s

Through the 1950s and 1960s, American productivity grew at 3% percent a year, allowing American workers to enjoy substantial increases in living standards.

Since 1973, productivity increases averaged only 1.1% as real wages and economic growth stagnated.

But recently productivity growth has been much healthier, rising to 2.2% for the whole of 1998.

The growth in productivity has held down wage costs, as companies produce more goods without having to hire more workers. It has also meant that they can increase profits without having to raise prices, thus helping to fuel the boom in share prices on Wall Street.

But Mr Greenspan warned that eventually the boom will lead to more workers being hired, and pressures on wages, as the productivity boom plays itself out.

The current figures show that the US economy has not yet reached that point, despite unemployment at a 27 year low.





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