Labour productivity in Canadian businesses jumped 0.7% in the first quarter, Statistics Canada reported today.

That’s more than triple the 0.2% pace in the previous quarter, and its best performance in more than a year.

At the same time, unit labour costs, a key measure of inflationary pressures on wages, slowed substantially.

StatsCan said the January-to-March productivity surge represented the largest gain since the 1% recorded in the third quarter of 2005.

Both the services and goods industries made positive contributions to the overall productivity performance in the first quarter.

Manufacturing, construction, agriculture, forestry, fishing and hunting as well as in wholesale and retail trade, and finance and insurance services all recorded gains.

Labour productivity, as measured by real gross domestic product per hour worked, is a key factor in higher economic growth and long-term improvement in the standard of living.

In the United States, quarterly productivity growth in the business sector remained lacklustre, increasing only 0.1% between January and March.

The agency says the gap in productivity growth between the two countries stems primarily from the difference in business sector real GDP growth. For the first time in over a year, the United States experienced a significantly weaker GDP growth than Canada in the first quarter.

In Canada, real GDP in the business sector grew 0.9% in the first quarter of 2007, three times what it was in the previous quarter (0.3). It was the highest quarterly growth in a year.

Consumer spending on goods and services, which edged up to 1% from 0.9 in the previous quarter, continued to drive the economy. The accumulation of business inventories, due to increased output, also made a positive contribution to Canada’s quarterly GDP growth.

Unit labour costs slowed significantly in both Canada and the U.S. in the first quarter of 2007. Nevertheless, when measured in their respective national currencies, unit labour costs rose slightly faster in Canada than in the U.S.

Unit labour costs, as measured by the cost of wages and benefits of workers per unit of economic output, are an indicator of inflationary pressures on wages.

Labour costs per unit of output in Canadian businesses climbed 0.7% in the first quarter, compared with 1.3% in the previous quarter. This substantial improvement was attributable to higher productivity as well as to slower growth in hourly compensation, which decelerated from 1.7% in the fourth quarter of 2006 to 1.4% in the first quarter. For American businesses, unit labour costs were up only 0.5% in the first quarter, a sharp deceleration from the 2.2% increase recorded in the previous three months.