Eurozone productivity growth remained sluggish in the third quarter, even as the bloc’s economy experienced modest expansion, according to Eurostat data released on Friday. This marks a continuation of a prolonged period of weak productivity performance.
Year-on-year, per capita productivity showed no change, while productivity based on hours worked grew by 0.5%, only half the pace of overall economic growth, Eurostat reported.
The productivity slowdown has been particularly pronounced since the pandemic, with a significant gap emerging between Europe and the U.S. due to various structural challenges likely to persist. Europe faces hurdles such as dependence on costly imported energy, inefficient labor markets, fragmented regulations, and reliance on exports amid deglobalization.
The eurozone economy grew by 0.4% quarter-on-quarter, consistent with previous estimates, while employment increased by 0.2%, also in line with earlier figures.
However, signs of a sustainable recovery remain scarce. Industrial activity remains in recession, exports are weak, investment levels are subdued, and households are prioritizing saving over spending.
Despite these challenges, there are hints of modest improvement in productivity, which has recovered from its lowest point a year ago to show slight gains, particularly in terms of hours worked.
A critical concern for the European Central Bank (ECB) is that weak productivity growth exacerbates inflationary pressures, complicating efforts to bring price growth back to its 2% target.
