EU Productivity Declines for Third Month Running in June

July 06, 2012 /

The latest productivity data from Markit, covering the EU manufacturing and services economy, signalled an
ongoing reduction in output per worker. Declines have been recorded throughout the second quarter. The
Eurozone economies remained the main source of weakness, but the UK registered only a fractional
improvement in labour productivity in June.

The seasonally adjusted EU Productivity PMI is a single-figure indicator of productivity, derived from
Markit’s national manufacturing and services PMI survey data. Readings above 50.0 signal an improvement in
productivity compared with one month previously, and readings below 50.0 a deterioration.

The EU Productivity PMI registered 48.2 in June, down from May’s 48.5. The latest reading signalled a
third successive monthly deterioration in output per employee, and at the fastest rate since March 2009.
For the third successive month, productivity fell in both manufacturing and services. As was the case in
both April and May, the goods-producing sector posted the steeper pace of contraction. The rates of decline were both the fastest in 39 months.

As has been the case throughout the second quarter, the Eurozone was the main source of weakness in June,
registering a fall in productivity for the tenth time in 11 months. The rate of deterioration accelerated further, and was the strongest since April 2009.

The three largest euro economies all registered lower productivity during June. Rates of deterioration
accelerated in Germany and Italy, while France posted a slower decline in output per worker than May’s record
pace. Italy remained the weakest overall performer.

The UK registered growth of output per worker, extending the current sequence of improvement to 41 months. That said, the rate of productivity growth was only marginal.

June data highlighted strengthening productivity trends in only ten of the 23 monitored industries. Of the
remaining sectors that recorded falling productivity, six registered faster rates of contraction than in May.
The strongest monthly growth rates in productivity were recorded in the Building Materials and Insurance
sectors. In Building Materials, production per worker increased for the seventh successive month, and at the
strongest rate since April 2011. Productivity growth in Insurance, meanwhile, accelerated to a four-month

The weakest sector in June was Hotels, where labour productivity fell for the fourth consecutive month.
Moreover, the rate of reduction in May was the strongest since September 2001, and the third-sharpest
in the history of the series. The other sectors to record faster declines in productivity since May were Autos, Chemicals, Pharmaceuticals, Telecoms and Transport.

Autos registered the second-fastest rate of decline in output per worker in June. Moreover, the current
sequence of falling productivity is the longest of any sector, at 15 months.


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