Home Business NewsBusiness UK productivity relapsed markedly in first quarter of 2018

UK productivity relapsed markedly in first quarter of 2018

by LLB Reporter
6th Jul 18 10:02 am

After sharp improvement in second half of 2017

The Office for National Statistics (ONS) has reported that UK productivity suffered a clear relapse in the first quarter of 2018 after seeing much-needed substantial improvement in both the fourth and third quarters of 2017.

Specifically, Office for National Statistics data show output per hour worked fell back 0.4 per cent quarter-on-quarter in Q1 2018. This was the sharpest drop since the fourth quarter of 2015. It followed gains of 0.6 per cent quarter-on-quarter in Q4 2017 and 0.9 per cent quarter-on-quarter in Q3, which had been the best quarterly performance since Q2 2011. In contrast, output per hour had declined 0.2 per cent quarter-on-quarter in Q2 2017 and 0.4 per cent in Q1.

Output per hour was stable at 0.9 per cent year-on-year in Q1 2018, having originally improved to this level in both the fourth and third quarters of 2017 from 0.4 per cent in Q2 2017. The ONS commented that “A 0.9 per cent growth compared with the same quarter in the previous year, is significantly lower than the long period of average productivity growth prior to the economic downturn, and represents a continuation of the UK’s “productivity puzzle”.

 Productivity relapsed in Q1 2018 as GDP growth slowed sharply and number of hours worked picked up

The Q1 2018 relapse in productivity was the consequence of gross value added in the economy slowing to just 0.2 per cent quarter-on-quarter while the number of hours worked rose by 0.6 per cent quarter-on-quarter.

In contrast, GDP growth had risen 0.4 per cent quarter-on-quarter in Q4 2017, while the number of hours worked fell by 0.3 per cent quarter-on-quarter. In Q3 2017, GDP had also risen 0.4 per cent quarter-on-quarter while the number of hours worked fell 0.5 per cent quarter-on-quarter.

Hours worked is a volatile series and the marked falls in Q4 and Q3 2017 were somewhat surprising and contrasted with increases of 0.4 per cent quarter-on-quarter in Q2 2017 and Q1 2017. This had fuelled suspicion that the sharp rebound in productivity in Q3 and Q4 2017 significantly overstated the underlying improvement – a suspicion that is seemingly reinforced by the relapse in Q1 2018. 

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