I spoke last week about the problems of interpreting productivity figures.
Recent data from the UK’s Office for National Statistics suggests that across the economy, productivity is still 4.3% below the pre-crisis peak and if it had continued growing at the pre-crisis trend, it would be 20% higher than today.
This has some advantages. Output is up slightly – and this means (because productivity is not rising) that unemployment is down. And the treasury benefits from increased tax revenues and lower benefits payments.
So far, so good. The problem is that this does not make UK firms and products more competitive – so any gains might be short-lived.
We should enjoy the ‘feel-good’ factor; the ‘bump’ might be nearer than we think.