The Week Ahead
PRODUCTIVITY AND COSTS
Tuesday, Feb. 10, 10 a.m. EST -- Output per hour worked in the nonfarm business sector probably didn't change from the third quarter to the fourth. Output surged at about a 4% annual rate last quarter, but total hours worked at nonfarm businesses increased just as much. Even with no gain in the fourth quarter, productivity for all of 1997 probably grew a solid 2%, on top of a 1.6% gain in 1996. However, with no efficiency increase and compensation growing at about a 5% annual rate in the fourth quarter, unit labor costs are likely to have grown at a rapid 4% clip. That means unit labor costs grew about 1.9% for all of last year. Tight labor markets in 1998 indicate that wage growth will continue to accelerate and that productivity gains will be harder to come by, because companies already have hired the most skilled workers. Those trends will squeeze profit margins.
Friday, Feb. 13, 8:30 a.m. EST -- Retail sales probably increased a modest 0.3% in January, says the median forecast of economists surveyed by MMS International, one of The McGraw-Hill Companies. Excluding vehicle sales, store receipts probably rose 0.4%. Warm weather in parts of the country hurt demand for winter-related items. In December, very strong car sales propelled retail buying up 0.7%. Excluding cars, the gain was just 0.2%. Consumer spending for all goods and services grew at a fast 3.2% annual rate in the fourth quarter, lifted by a 4.7% gain in real disposable income. Consumers may not take much of a breather in the first quarter.
Friday, Feb. 13, 8:30 a.m. EST -- Inventories held by manufacturers, wholesalers, and retailers probably grew 0.3% in December, says the MMS survey. That would follow a 0.4% advance in November. Business sales are likely to have risen 0.5% in December, after slipping in both October and November. Inventory accumulation contributed greatly to fourth-quarter economic growth.