Canada's productivity edges down in Q4 after two quarters of growth: TD Economics

Quotes from TD Economics:

- Canada's labour productivity growth edged down 0.1% in the fourth quarter after increasing in Q3. Productivity was essentially flat because the 0.6% increase in output of the business sector was entirely due to the growth in hours worked (+0.6%).

- The fourth quarter productivity data underscore how the depreciation of the Canadian dollar has helped lower Canadian ULCs relative to the United States. Canadian ULCs in U.S. dollar terms have fallen for two consecutive years now, whereas they have continued to rise in the United states. This has helped to improve the weak competitiveness in Canada after the recession. More specifically, the competitiveness of Canada's manufacturing sector is often compared to the U.S., and a stronger Canadian dollar in the early days of the recovery led manufacturing labour costs in Canada to dramatically outstrip the U.S.. The depreciation of the Canadian dollar over the past two years has helped to erase the differential in manufacturing labour cost competiveness between the two countries.

- While it is encouraging to see the improvement in Canada's productivity in 2014, these gains are likely to slow in 2015 as the collapse in oil prices weighs on GDP growth. That said, the improvement in Canada's competitiveness since 2012 vis a vis the United States, particularly in manufacturing, should help the performance of non-energy export sectors in 2015. That should in turn assist the broader economy to weather the blow from the collapse in oil prices.