An enjoyable evening at the SPR IPF UK Property outlook seminar on 1o January. In a bid to be optimistic, Sophie van Oosterom from Schroders asked the panel for one change that might make 2023 better than expected. This prompted a rather left-field response from John Roe from Legal & General Investment Management (LGIM) who suggested that problems with the measurement of productivity meant that growth may actually be a lot higher than currently stated – something known as the productivity puzzle.

This blog discusses the 8 causes of the productivity puzzle:
https://lnkd.in/eYN4VPCD

– Difficulty in measuring output
– Difficulty in measuring inputs
– Factorial productivity
– Changing conditions
– Service sector
– Different periods
– Difficulty in measuring man-hours
– Technological changes

And this is what the ONS had to say:

The productivity puzzle is now a firmly established part of the UK macroeconomic landscape. For five decades before the 2008 economic downturn, the average output each UK worker produced in an hour of work increased steadily by around 2% a year. In contrast, the productivity record since the economic downturn has been historically weak, enduring its slowest recovery from an economic downturn since the Second World War. While other countries have seen similar slowdowns, the UK’s productivity puzzle is deeper and more persistent than elsewhere.

The fall in productivity growth is even more perplexing because it comes at a time of apparently rampant technological innovation and the strongest labour market performance since the 1970s, with high levels of employment and low unemployment.

https://lnkd.in/ePDQSqGz

Hopefully productivity will be high in 2023 as we all watch the inflation number closely to see if they fall faster than expected.