Total Economy Database™ - Key Findings
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Global Productivity Growth Stuck in the Slow Lane with No Signs of Recovery in Sight
- As the global economy continued its tepid performance in 2014, so too has world productivity growth. Global labor productivity growth, measured as the average change in output (GDP) per person employed, remained stuck at 2.1 percent in 2014, while showing no sign of strengthening to its pre-crisis average of 2.6 percent (1999-2006).
- The lack of improvement in global productivity growth in 2014 is due to several factors, including a dramatic weakening of productivity growth in the United States and Japan, a longer-term productivity slowdown in China, an almost total collapse in productivity in Latin America, and substantive weakening in Russia. Notable productivity improvements in India and Sub-Saharan Africa were insufficient to compensate for the weakening performance elsewhere.
- Labor productivity in mature economies grew by 0.6 percent in 2014, slightly down from 2013 when it was 0.8 percent. Labor productivity growth in the United States declined from 1.2 percent in 2013 to 0.7 percent in 2014, whereas Japan did see even a more dramatic decline from 1 percent to -0.6 percent. The Euro Area saw a very small improvement in productivity —from 0.2 percent in 2013 to 0.3 percent in 2014. Emerging and developing economies saw a very small improvement in labor productivity growth, from 3.3 percent in 2013 to 3.4 percent in 2014.
- An alarming result from this year’s estimates in The Conference Board Total Economy DatabaseTM is that the growth rate of total factor productivity (TFP), which measures the productivity of labor and capital together, continues to hover around zero for the third year in a row, compared to an average rate of more than 1 percent from 1999-2006 and 0.5 percent from 2007-2012. The challenge on TFP growth is widespread across the globe. Most mature economies including the United States, the Euro Area and Japan show near zero or even negative TFP growth. In China, TFP growth has turned negative, and in India it is just above zero, at 0.2 percent. Both in Brazil and Mexico TFP growth continues to be negative, respectively at -2.3 and -1.7 percent.
- For 2015, a further weakening in labor productivity is projected, down to 2 percent, continuing a longer-term downward trend which started around 2005. Despite a small improvement in the productivity growth performance in mature economies (up to 0.8 percent in 2015 from 0.6 percent in 2014), emerging and developing economies are expected to see a fairly large slowdown in labor productivity growth from 3.4 percent in 2014 to 2.9 percent in 2015. The decline is primarily a reflection of the continuing fall in growth and productivity in China, but also includes the negative growth rate of Brazilian and Russian productivity.
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