Europe's productivity rebounded last year to rise at a faster rate than in the US for the first time this decade, but the improvement appears to be transitory, according to research published today by the Conference Board, the international business organisation.
Output per hour worked rose 1.5 per cent in 2006 across the 27 European Union member states, compared with an improvement of 1.4 per cent in the US.
However, the improved European average masked strong performances by Germany and both Nordic and eastern European countries, which contrasted with serious weakness in Spain, Italy and Portugal.
Professor Bart van Ark of Groningen university in the Netherlands and the Conference Board said the European improvement was largely "cyclical".
While strong employment growth across Europe had been "very welcome", he said that the disappointing European productivity record continued to suggest "the limited impact of technical change, innovation and liberalisation of product and labour markets in many countries".
The productivity data was published on the eve of this week's World Economic Forum gathering in Davos, where the shifting balances of global economic power will be the central theme.
The Conference Board recorded that productivity growth remained extremely high in the emerging countries of China and India, as well as eastern Europe, where economies increasingly shed inefficient companies and where huge numbers of workers moved to jobs in manufacturing from relatively inefficient sectors such as agriculture.
China's productivity growth rose 9.5 per cent in 2006, while India achieved growth of 6.9 per cent. By comparison, the 12 new EU member states achieved4.1 per cent growth.
However, the Conference Board found signs that the much higher levels of productivity growth in countries such as China and India might be transitory.
Prof van Ark said: "We're beginning to see the end of the transition [in emerging economies]."
To continue to develop quickly, China, India and eastern European countries would need to develop new consumer markets in services, he added.
"With new sectors and new companies doing new things, emerging economies can still generate an enormous amount of productivity growth, but it is unlikely to be as high as 10 per cent."
Among industrialised countries, productivity problems in parts of Europe are also now matched by declining productivity growth in the US, where an economic slowdown was accompanied by a rapid rise in employment, according to the Conference Board. The US economy last year recorded its lowest rate of labour productivity growth in more than a decade, casting doubt on the ability of the Federal Reserve to cut interest rates.
