Labour productivity in the Canadian business sector fell by 0.4% between April and June, the first time in two years it has slipped into negative territory.

Statistics Canada reported today that on a year-over-year basis, productivity growth – a measure of real gross domestic product per hour worked – has declined to 1.4% in the second quarter of 2006 from 2.1% in the first quarter.

The agency sayid the second-quarter decline in productivity was the direct result of a slowdown in economic activity combined with a more pronounced increase in hours worked.

The goods-producing industries, which posted a 1% decline in labour productivity, were primarily responsible for the overall drop.

There were production drops in the mining and oil-and-gas extraction sectors, the latter suffering several production stoppages due to unforeseen repairs, and economic activity in the construction sector also slowed down dramatically to 0.4% from 2.4.

Labour costs per unit of output, a key measure of inflationary pressure on wages, continued to increase at a slow pace in the second quarter, however, rising 0.3%.

Gains in unit labour costs in Canadian businesses have remained modest since the beginning of 2006.