Labour productivity of Canadian businesses fell 1% in the second quarter. This decline followed a nearly flat first quarter and an increase of 1.2% in the fourth quarter of 2024, according to Statistics Canada
The last time productivity declined as sharply was in the last quarter of2022(-1.1%).
The uncertainty surrounding international trade led businesses to reduce their output for the first time in seven quarters. At the same time, hours worked continued to increase (0.3%) but at half the pace of the previous quarter (0.6%), due to a slowdown in services-producing businesses.
Overall, hours worked were up in 10 of the 16 industry sectors in the second quarter, and they were virtually unchanged in three sectors: manufacturing, professional services and other business services.
Real gross domestic product (GDP) of businesses contracted0.7% in the second quarter, after growing0.5% in the previous quarter. This was the first contraction since the third quarter of2023(-0.4%).
Manufacturing and wholesale trade were the main contributors to the second quarter decline in productivity in the business sector. These two sectors are heavily dependent on merchandise trade and were particularly affected by the uncertainty surrounding Canada’s trade activities with the United States during the quarter.
Overall, nine of the 16 industry sectors recorded productivity decreases, with utilities (-4%), wholesale trade (-2.6%) and manufacturing (-2.1%) recording the steepest declines.