The digital revolution is still failing to improve economic performance around the world, dashing hopes that technology was beginning to help economies emerge from a protracted productivity slowdown that has weakened living standards.
A productivity growth rebound in 2017 and at the start of 2018 petered out last year with little improvement expected in 2019, according to new data from the Conference Board, the US-based business research organisation, which was shared with the Financial Times.
The figures come after finance ministers and central bank governors wrapped up the spring meetings of the IMF on a note of guarded optimism, saying that despite many risks in the global economy, they expected growth to “firm up” in the second half of the year.
With some progress in US-China trade talks, the prospects of a no-deal Brexit having waned and Chinese stimulus boosting growth in the world’s largest economy, there was a feeling that the weakness in recent economic data might be more of a soft patch.
Mario Draghi, president of the European Central Bank, said the eurozone economy was also showing “remarkable resilience” with jobs being created, a strong service sector and incomes and wages rising “almost everywhere, not just in core [eurozone] countries”.
But the weakness in economic data has “dashed hopes” that the pick-up in productivity growth seen in 2017 and early 2018 would last, according to Bart van Ark, chief economist of the Conference Board.
“The long-awaited productivity effects from digital transformation are still too small to see it reflected in a lasting improvement at the macroeconomic level,” Mr van Ark said.
Globally, the annual growth in output per worker has been hovering around 2 per cent for the past few years, compared with an annual average rate of 2.9 per cent between 2000 and 2007.
“Among mature economies, the productivity slowdown has bottomed out in recent years, but with no clear signs of a revival,” the Conference Board said.
It said the most alarming element of the data was that all of the improvement in output per worker came from increases in capital expenditure or the qualifications of the labour force.
There was no increase in the overall efficiency of the global economy, indicating that innovation or efficiency gains were not contributing to global economic performance.
Although productivity growth has slowed in almost every economy since the early years of the century, the trends have not been uniform. In the US, a jobless productivity phase of 2000-07 has turned into a “productivity stagnation”, the Conference Board said.
Much of the eurozone had an extremely weak year in 2018 with consistent rises in employment, but little growth in output. With Brexit uncertainty harming investment, the performance of the UK was even worse.
In emerging economies, the rapid catch-up phase in which countries rapidly increased productivity by adopting the business techniques of advanced economies has come to a halt. While still having much faster annual productivity growth than advanced economies, growth in 2018 slowed to 3.5 per cent, compared with an annual average rate of 5.5 per cent between 2000 and 2007.
