Half-yearly growth comparing the second and first half of 2018 was 1.2%: as the Treasury say, the strongest figure since the financial crisis (since 2005 in fact).

Let’s explore this.

1. Higher productivity is the result of levelling down

In general terms, the UK economy is currently on a negative trajectory:

GDP growth is weak; on an annual basis, the weakest for 5 years

employment growth has slowed and

hours worked have declined (though the extent of the decline may be erratic)

So the only reason that the productivity figure has improved is because the fall in hours (and jobs) growth is worse than the slow down in output growth.

To illustrate: looking at the half yearly figures (on which the Treasury claim is based) we can compare the latest figure with the corresponding figure from a year ago (illustrated below). Half yearly GDP growth slowed to 0.8% in the second half of 2017, when it was 1.2% in the second half of 2016. Hours are now in decline by -0.4%, when in the second half of 2016 they rose by 0.6%. So, productivity rises to 1.2% from 0.5%. But this is the worst possible way for productivity to improve. Crudely you can think about it like this: we haven’t even been able to produce more for less. We’ve produced less, and worked slightly fewer hours to do so.

GDP growth minus hours growth equals productivity growth