1. Productivity and monetary policy Deputy Governor Svante Öberg Juni 2007

2. Main message
The rapid increase in productivity is the most important explanation for the low inflation in recent years.
But productivity will increase more slowly in future.
Combined with higher wage increases, this indicates higher inflationary pressures and thereby a higher interest rate over the coming years.

3. Three important questions
The reasons behind the strong productivity increase
Developments in productivity over the coming years
The significance of productivity for monetary policy

4. Productivity in the business sector Annual percentage change
Trend
Sources: Statistics Sweden and the Riksbank

5. Sources: Statistics Sweden and the Riksbank
The inflation outcome and inflation in the absence of shocks to productivity growth according to the Riksbank’s macroeconomic model Annual percentage change
Note: UND1X inflation.
Sources: Statistics Sweden and the Riksbank

6. Sources: Statistics Sweden and the Riksbank
Productivity in the business sector Annual percentage change, 8-quarter moving average
Sources: Statistics Sweden and the Riksbank

7. Structural changes Deregulated markets Globalisation
IT – production and use

8. Productivity in the business sector Annual percentage change
Note. Data are seasonally and day adjusted
Sources: Statistics Sweden and the Riksbank

9. Productivity contribution, entire economy Annual percentage change
TFP
Other capital
IT-capital
TFP
Other capital
IT capital
Source: M. P. Timmer, G. Ypma and B. van Ark (2003), "IT in the European Union: Driving Productivity Divergence?", GGDC Research Memorandum GD-67 (October 2003), University of Groningen, Appendix Tables, updated June 2005.

10. Labour productivity, entire economy Annual percentage change
Note. Outcome and forecast according to Monetary Policy Report February 2007.
Sources: Statistics Sweden and the Riksbank

11. Main message
The rapid increase in productivity is the most important explanation for the low inflation in recent years.
But productivity will increase more slowly in the future.
Combined with higher wage increases, this implies higher inflationary pressures and thereby a higher interest rate in the coming years.