Good news on wage costs but improvement in productivity disappointing

The latest UK productivity and wage cost figures, released this morning by the Office for National Statistics, provide further evidence that the labour market is at present generating little inflationary pressure. But while this is welcome news ahead of this weekís monthly meeting of the Monetary Policy Committee (MPC), growth in productivity is recovering only slowly from last yearís trough, says CIPDís Chief Economist John Philpott.

Dr Philpott comments:

ìGiven rising unemployment and the recent slowdown in growth in average earnings, even a modest improvement in productivity growth has been sufficient to curb wage cost pressure. This should help reassure the MPC that a rise in interest rates is not required for the time being. Nonetheless, the improvement in productivity growth from last yearís 15-year low is disappointing, with only manufacturing showing signs of any marked recovery. Although this will provide a boost to export competitiveness, it remains clear that UK plc in general, and particularly the public services, needs to significantly raise its game, especially with regard to the management of people at work.î