The evidence suggests that the recent pick-up in euro-zone productivity growth was probably a temporary reflection of the cyclical strength of the economy rather than a permanent or structural development. We suspect that the region’s sustainable rate of productivity growth remains around its long-run average of 1º% y/y. Nonetheless, with a rising workforce participation rate and falling sustainable rate of unemployment still having a positive impact, the economy’s potential growth rate should remain close to 2% in the next few years.
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