The US economy has been faring better than thought, according to figures on productivity and the service sector.



The US service sector grew in August, beating expectations, according to the Institute for Supply Management (ISM).

The ISM's non-manufacturing index registered 50.6 in August from 49.5 in July. A figure above 50 denotes growth.

Meanwhile separate data showed productivity better than forecast in the second quarter, while labour costs declined, official data showed.

The figures suggest the world's largest economy is in better shape than had previously been thought.

Productivity - the amount of output for every hour worked - climbed to an annual rate of 4.3% in the three months to June, the Commerce Department said.

In the first three months of the year, productivity rose 2.6%.

Simultaneously, labour costs dropped to 0.5% on a yearly basis, reversing the rise seen in the three months to March when they were 1.2% higher.

For employers, if labour costs rise quicker than productivity, it can contribute to quickening inflation.

The productivity data was viewed positively by analysts, who argue it helps keep a check on inflation at a time when firms are facing a sharp rise in costs.

Economic uncertainty

The latest figures reinforce the view held by some analysts that the US might have seen the worse of the downturn, while Europe is still being squeezed.

In August, figures showed the world's largest economy expanded at a revised rate of 3.3% annually during the second quarter of 2008, much higher than its first estimate of 1.9%.

But there is still much uncertainty surrounding the outlook for the US economy.

Only a day earlier, on Wednesday, the US central bank said the economy faced slow growth and higher prices.

The Federal Reserve's so called Beige Book report said economic activity was "weak, soft or subdued" in the US, as consumers tightened their belts.
BBC News