U.S. nonfarm productivity fell more sharply than previously thought in the first quarter, leading to a jump in labor-related production costs, a trend that could spur a rapid increase in inflation. Productivity dropped at a 3.1% annual rate instead of the previously reported 1.9% rate, the Labor Department said on Thursday. That was the first back-to-back fall in productivity since 2006.
The U.S. trade deficit surged to its highest level in nearly 6-1/2 years in March as imports rebounded strongly after being held down by a labor dispute at key West Coast ports, suggesting the economy contracted in the first quarter.
Yesterday’s market weakness has been attributed to worse that expected economic numbers, particularly the extremely disappointing 0.2% GDP growth for the first quarter. This was much worse than the expected tepid growth of 1%.
Growth in the first quarter fell well short of expectations, with the economy barely managing to maintain any momentum at all. GDP in the three months ending March expanded at an annualized pace of 0.2% hugely missing an expected gain of 1.0% among economists surveyed by Bloomberg.