U.S. productivity growth was mildly stronger during the third quarter of 2005 than first thought, while unit labor costs were revised sharply lower for two quarters in a favorable sign for inflation.

Meanwhile, U.S. factory orders tumbled in October, reflecting further manufacturing weakness. However, a key gauge of the services sector showed continued strength.

Nonfarm business sector productivity increased 0.2% during July through September, the U.S. Labor Department said today. Originally, Labor said productivity was unchanged during the third quarter.

Wall Street expected an upward revision in productivity for the third quarter — but a bigger one. Economists saw productivity rising at a 0.5% annual rate.

There was an unrevised 1.2% increase in second-quarter productivity, which is output divided by hours worked.

Third-quarter unit labor costs — a gauge of inflationary pressures — rose by 2.3%. Economists expected a 3.2% advance. Labor originally estimated a 3.8% increase for the third quarter.


Meanwhile, U.S. factory orders took their sharpest fall in six years during October, dropping even more than expected and sending another signal of weakness in the manufacturing sector.

Factory-goods orders decreased 4.7%, the U.S. Commerce Department said today. September orders rose 1.7%; bookings were originally estimated 2.1% higher. The big drop in October exceeded expectations on Wall Street, which had been looking for a 4.5% decline. It was the largest decrease since 8.6% in July 2000.

However, the services sector recorded some strength in November, according to another report released today. The Institute of Supplly Management’s nonmanufactuing index increased to a reading of 58.9 from 57.1 in October. Significantly the employment index edged up to 51.6 from 51.0.

The November increase is the 44th consecutive month of expansion and represents the strongest monthly expansion since May. It comes after the November ISM manufacturing index dropped below 50 for the first time since April 2003.