Canadian labour productivity fell for the first time in two years in the second quarter because of an economic slowdown and "a more pronounced increase in hours worked," Statistics Canada said on Wednesday.
Productivity fell by 0.4 percent from the first quarter, in contrast to the United States, which saw a 0.4 percent gain. Year over year, Canadian productivity growth fell to 1.4 percent from the 2.1 percent registered in the first quarter. Goods-producing industries saw a 1.0 percent quarterly decline in productivity and were primarily responsible for the overall fall.
The Bank of Canada and the federal government watch the productivity number closely for hints of whether the economy will hit production constraints. Productivity is also key to meet competition from China and elsewhere, and it has become a politically charged indicator.
Statscan said quarterly growth in unit labour costs, a measure of inflationary pressure on wages, was a modest 0.3 percent, slightly down from 0.4 percent in the first quarter. Year on year, the costs were up by 2.6 percent.
"However, the competitive position becomes advantageous for US businesses when unit labour costs are adjusted for the exchange rate," Statistics Canada said. In the second quarter, the rise in the Canadian dollar resulted in a 3.1 percent increase in Canada's unit labour costs expressed in US dollars, compared with the 1.2 percent rise in the United States.
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