U.S. nonfarm productivity increased at its strongest pace in 1-1/2 years in the second quarter, keeping wage inflation subdued for now.
The Labor Department on Wednesday revised productivity to show it rising at a 3.3 percent annual rate, the quickest since the fourth quarter of 2013, instead of the 1.3 percent pace reported last month.
Economists polled by Reuters had forecast productivity, which measures hourly output per worker, being revised up to a 2.8 percent annual growth pace. Productivity contracted at a 1.1 percent rate in the first quarter.
The government last week revised second-quarter gross domestic product to show GDP expanding at a 3.7 percent annual pace instead of the 2.3 percent rate it had initially estimated.
But the trend in productivity remains weak. Productivity rose 0.7 percent from a year ago instead of the 0.3 percent increase reported last month.
Growth in productivity is an important determinant of the economy's non-inflationary speed limit.
Though the second-quarter bounce back is dampening wage pressure for now, the weak trend in productivity suggests the economy's growth potential could be lower than the 1.5 percent to 2.0 percent pace that economists have been estimating.