UK Low Productivity Unexplained by BOE

The Bank of England has admitted that it cannot explain the “puzzle” of weak levels of U.K. productivity — an important measure in determining when interest rates could start rising – while other indicators such as employment and economic output seem to be doing so well.

Productivity remains around 4 percent below pre-crisis levels, the Bank of England said, and 16 percent below levels it should be at had the pre-crisis trend continued.

Defined as the quantity of goods and services produced per worker or per hour, labor productivity is a key measure to determine the health of an economy.

The BoE paper, published in the central bank’s quarterly bulletin of economic research said since the onset of the 2007–08 financial crisis, labor productivity in the U.K. had been “exceptionally weak”.

“The fall in labor productivity during the recent recession has been larger than in any other post-war recession,” the paper found.

Nonetheless there are other indicators that the U.K economy was improving. The National Institute of Economic and Social Research forecast last week that the U.K. economy grew by 0.9 percent in the three months ending in May after growth of 1.1 percent in the three months ending in April 2014. That suggests U.K. GDP has surpassed the level pre-recession peak.

via CNBC

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.