Analysis: UK Q4 Productivity Rise Due Odd Fall In Hours Worked

-Q4 Output Per Hour Up 0.7% q/q; Q4 Output Per Worker Up 0.1%

By David Robinson and Jamie Satchithanantham

     LONDON (MNI) - Data issued Friday by the Office for National Statistics

showed UK labour productivity, as measured by output per hour, rose sharply in

both the third and fourth quarters of 2017, but this was very largely due to a

decline in hours worked.

     Output per hour was up 0.7% in Q4 from Q3 while output per job and per

worker were both up just 0.1% over the same timeframe. 

     Senior Office for Budget Responsibility (OBR) official and former Bank of

England Deputy Governor Charles Bean, in an interview with Market News,

highlighted the oddity of productivity gains in a growing economy being driven

by falling hours worked.

     The most likely outcome according to Bean was that it would turn out to be

a blip with hours worked rising this year. 

     Some support for the OBR's scepticism that productivity would continue to

grow rapidly because of falling hours worked came in the latest labour market

data.

     Total weekly hours worked, the denominator in the output per hour

productivity calculation, rose sharply in the three months to January. 

     Total hours worked rose to 1,034.1 million from 1027.7 million in the three

months to October, and moved back closer to the level set in the three months to

July (1,033.5 million). 

     The next labour market release, due April 17, will tell us whether hours

worked continued this upward trend as we progressed through 2018. If so, it

would support the idea of the productivity data correcting itself within the

first few quarters of 2018.     

     The ONS Q4 productivity data are a second take on the figures, with the

earlier flash estimate showing output per hour up 0.8% on the quarter.

     The ONS figures also showed labour costs rising faster than productivity.

     Unit labour cost (ULC) rose 2.1% in the year to Q4, up from the 1.4% growth

in the year to Q3.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

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