FRANKFURT (Reuters) – Euro zone productivity growth remained weak in the third quarter despite a modest expansion in the bloc’s economy, continuing a poor run that has lasted years, data from Eurostat showed on Friday.
Per capita productivity was unchanged compared to the same quarter a year earlier while it expanded by 0.5% based on hours worked, or at about half the rate of overall economic growth, Eurostat said.
Productivity growth has been especially weak since the pandemic and a large gap has opened between Europe and the U.S., driven by a host of factors that could persist.
Europe is struggling with an excessive reliance on expensive, imported energy, inefficient labour markets, fragmented regulation and reliance on exports in a period of deglobalisation.
The euro zone’s economy expanded by 0.4% on the quarter, unchanged from a previous estimate, while employment was up 0.2%, also in line with a preliminary figure.
But there is little to suggest a sustainable recovery with industry still in recession, exports weak, investments muted and households continuing to keep consumption down and opting to save their cash instead.
Still, there appears to be a modest improvement in productivity, which reached its lowest level a year ago and has now turned positive, at least based on hours worked.
A key issue for the ECB is that poor productivity growth puts upward pressure on prices and makes it harder for the European Central Bank to steer price growth back to its 2% target.