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Ernie Tedeschi said a proxy based on U.S. Q3 GDP and hours data suggests year-over-year productivity growth will likely cool in Q3, with a range of about 1.2% to 1.5%. He added that this slowdown is due in part to weak quarterly productivity in 2025 Q4 and the first half of 2026.
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Tedeschi previously highlighted that computers and software contribute 25 basis points to core PCE inflation, though he said they are not the main driver of the current gap here. He also observed that California regularly posts stronger GDP and productivity growth compared to the national average here. The latest data adds context to his ongoing analysis of productivity trends.