We still believe that the current productivity boom is mainly a cyclical phenomenon, as tight labour market conditions have forced firms to expand output by boosting the efficiency of their existing workers. But the latest data also show that capital deepening is playing an increasingly important role and, unlike during the dotcom productivity boom that started in the mid-1990s, this productivity surge reflects investment in software rather than hardware. That could be an early sign that a structural uplift due to advances in artificial intelligence (AI) is underway.
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