Canada’s labour productivity showed no increase in 2004, the worst performance since 1996, Statistics Canada said today.

Labour productivity – the ratio of economic output for every hour worked – has now been virtually flat for two years. Last year’s 0% change was preceded by growth of only 0.2% in 2003.

During the fourth quarter alone, productivity rose a marginal 0.2% from the third quarter.

Labour productivity suffered last year as both economic activity, stung by the rising Canadian dollar, and the number of hours worked increased in tandem for a second year in a row, Statistics Canada said.

“Canadian businesses had to cope with a 7.1% gain in the value of the loonie relative to the U.S. greenback last year on the heels of a 10.8% gain the year before,” said the federal government department.

The rising loonie has made Canadian exports a more difficult sell, which has hit the country’s manufacturing sector.

Canada’s productivity growth in the fourth quarter of 2004 was outstripped by the 1% growth in the U.S. in the same quarter.

Statistics Canada said the gap in productivity performance between the two nations was due to the differences in the growth of the two countries’ real gross domestic product.

In Canada, GDP growth in the business sector slowed to 0.3%, down from 0.7% in the third quarter, due to a decline in exports of goods and services.

In the U.S., GDP growth slowed slightly from 1.1% to one% between the third and the fourth quarter. Output in the United States has grown at rates higher or equal to one% since the second quarter of 2003.

“The slight deceleration south of the border was due partly to a slowdown in exports and in consumer expenditures – mainly from a slowdown in car purchases – and the acceleration of imports,” said Statistics Canada.

Separately, StatsCan said industrial capacity utilization increased only marginally during the fourth quarter of 2004 as a result of weak exports.

The drop in international demand had an especially strong impact on the manufacturing sector, where capacity utilization stalled.

StatsCan said industries operated at 86.0% of their capacity, compared with 85.7% in the third quarter. The fourth-quarter level was 1.2 points below the peak of 87.2% reached in the first quarter of 1988.