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Forex Flash: Productivity growth is the paramount driver of US long-term growth – Goldman Sachs

According to the Economics Research Team at Goldman Sachs, “We take stock of the latest evidence on productivity growth in the US and review the implications for markets. Many economic scenarios that would be bearish for rates and credit spreads, and for risky assets more generally, tend to involve the risk that productivity growth slows and drags down the trajectory of long-run growth.”

In particular, “We find that the main ‘productivity risk’ facing investors today is that a slowdown in productivity growth was already in motion before the recession began. It is too early to tell, of course; future data revisions may erase what we think we know today.” they add. However, the underlying trends in productivity growth seem to have weakened since 2003, and this weakness may have escaped attention due to the weakness of aggregate demand conditions.

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