Canada: Productivity Increased In Q2 But Don’t Get Excited

Labour productivity of Canadian businesses advanced by 0.2% q/q in Q2 2022, for the first increase in real output per hour worked since the lockdowns in Q2 2020. Unit labour cost – the cost of labour per unit of output – of Canadian businesses grew 2.0% in Q2 2022. The ongoing rise in unit labour cost reflects the fact that productivity growth in Canada is still too weak to offset persistent wage pressures. However, sustained forceful action by the Bank of Canada is expected to tamp down wage growth and bring inflation back to the Bank’s 2% target over the outlook.