Productivity also has an influence on inflation trends. If output is rising faster than the hours worked, it indicates that efficiency is growing and this efficiency helps moderate price increases. Productivity growth can be a key to achieving strong economic growth without high inflation.
Implications for the economy and savings accounts
With productivity growth estimated at -1.7 percent for the first quarter and 0.9 percent for the first quarter, so far 2013 is on track for a net loss in productivity for the year. This could mean a bad year for growth, yet with some inflation pressure despite the weakening economy.
That environment is the worst of both worlds for savings accounts. Low growth means little hope of higher interest rates, while inflation means savings accounts would lose ground to rising prices at a faster rate. In sum, you can add productivity to the warning lights that have begun to flash recently on the economic dashboard.