Economies grow through time due to a number of different causes. In some cases it is because the labour force is growing. In others it is because they devote a high percentage of national income to investment in capital goods. Perhaps the most important reason, however, is productivity growth.
Productivity growth is the ability of the economy to get more output from a given input of production factors, which ultimately leads to an increase in living standards. In this Interpreting Economic Data we will examine the role of productivity growth in explaining the growth performance of the UK economy. Productivity growth is volatile, changing significantly from one year to the next — often due to the state of the economy — and occasionally even becoming negative. Over the long term, however, productivity growth provides the most important positive contribution to UK economic growth.
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