(Bloomberg) -- U.K. productivity rose the most in more than six years in the three months through September, rebounding from a slump in the previous two quarters.
Output per hour increased 0.9 percent, the biggest increase since the second quarter of 2011, the Office for National Statistics said on Friday. From a year earlier, it was up 0.8 percent, the most since the end of 2016.
While the figures show an improvement, the ONS damped any optimism by pointing out that productivity growth has been poor for years.
“While this stronger growth is welcome, it is set against a decade of weak productivity growth. Ten years after the peak of labor productivity, output per hour worked is just 1 percent higher - a slowdown which is without parallel since official records began.”
--ONS Deputy Chief Economist Richard Heys
Weak productivity growth has marred the U.K. economy's performance since the financial crisis, and expectations for a pickup almost every year have failed to be fulfilled. The Bank of England says it has eaten into the economy's potential growth, meaning there could be unwelcome upward pressure on inflation even at a slower growth pace.
The BOE is currently carrying out its annual review of the supply side of the economy and will publish the findings in its February Inflation Report. That will be a crucial piece of research for the outlook for interest rates. The central bank raised its key rate in November for the first time in a decade, citing the economy's reduced speed limit and potential for overheating.
Economists surveyed by Bloomberg see growth of just 1.4 percent this year. Expansion was probably 1.5 percent in 2017, making it the weakest among the Group of Seven nations.
The ONS said unit labor costs rose 0.4 percent in the third quarter and were up 1.3 percent from a year earlier, the weakest annual pace in more than two years.
Part of the slowdown in unit labor-cost growth relates to mandatory pension enrolments boosting non-wage costs in 2016. Higher employer contribution rates under the program take effect this year, which may lift that figure again.
--With assistance from David Goodman
To contact the reporters on this story: Fergal O'Brien in London at fobrien@bloomberg.net, Jill Ward in London at jward98@bloomberg.net.
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson
©2018 Bloomberg L.P.
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