US productivity rise fails to get markets excited

US COMPANIES are continuing to trim costs and boost productivity, the latest figures show.

However, the 6% productivity increase for the second quarter failed to get markets, stuck in holiday mode, excited and the dollar drifted slightly out against the euro to 1.14 having opened at 1.1353.

Some fear the euro could still go to 1.20 before the year end, if the US persists with a weak dollar policy and uncertainty remains about the extent of the US recovery.

US Treasury Secretary John Snow is forecasting a 4.75% GDP growth this year, but most analysts say the figure is way too optimistic.

If it achieves 2.5% this year it will be doing well, said Niall Dunne, economist Ulster Bank Financial Markets.

Overall the markets were unmoved by the impressive jump in productivity gains in the US and stayed more or less flat reflecting midsummer lethargy. By late afternoon the Dow was up 20 points at 9078 while the Nasdaq fell marginally to 1644.

The FTSE also lost fractionally on the day and by late afternoon was trading at 4083 a dip of 12 points on the day.

In Dublin the ISEQ fell 97 points, a bit heavier than other markets with analysts suggesting that disappointing Cisco figures on Tuesday had a knock-on effect on Irish sentiment yesterday. However, despite the current malaise, the post-Baghdad bounce since the end of the Iraqi War has been sustained.

Since the end of the war most markets are up by about 20% and, despite the odd sideways move, the gains have been sustained.

In the short term the markets are still nervous and will mark time until the outlook for the US becomes more certain. While costs have been cut and productivity rises, few new jobs are being generated.