Productivity growth stutter raises concerns on economy
UK PRODUCTIVITY declined at the end of 2014 and remains slightly lower than its pre-crisis level.
Output per hour worked fell by 0.2 per cent in the final three months of 2014 compared with the three months ending September, according to figures released yesterday by the Office for National Statistics. Over 2014 as a whole, productivity was little changed from 2013. Economist Howard Archer from market analysts IHS said it was “disappointing news for the UK economy… If productivity has taken a significant lasting hit, it means that the economy has less potential to grow without generating inflationary pressures and that interest rates will need to rise at an earlier stage.”
However, some economists remain optimistic that productivity growth will recover. “Productivity has still not even returned to its long-run average growth rate of about two per cent,” said economist Vicky Redwood at Capital Economics.
“Nonetheless, we remain more optimistic than most about the scope for productivity to bounce back, given that we still see few plausible explanations for why productivity should have suffered such a big irrevocable one-off hit from the recession.”