Canadian business productivity growth slowed sharply in the first quarter of 2025, rising just 0.2% compared to 1.2% growth in the previous quarter, Statistics Canada reported Wednesday.
Despite the slowdown, the modest increase marks the second consecutive quarterly gain in productivity—the first time Canada has seen back-to-back quarterly increases since the COVID-19 pandemic began.
The productivity gains came as hours worked in the business sector rebounded 0.4% after declining 0.5% in the fourth quarter of 2024. Real gross domestic product of businesses rose 0.6%, matching the pace of the previous quarter but outpacing growth in hours worked.
Goods sector drives overall productivity gains
Goods-producing businesses led the productivity growth, with their output per hour rising 0.8% in the first quarter, up from 0.3% in the previous quarter. Four of the five goods-producing sectors posted increases.
Service-producing businesses saw productivity decline 0.5% after rebounding sharply in the previous quarter with 1.3% growth.
Among individual sectors, wholesale trade recorded the largest productivity gain at 2.6%, followed by agriculture and forestry at 2.0% and utilities at 1.5%. Real estate posted the largest decline at 3.9%.
Overall, productivity rose in eight of the 16 main industry sectors during the quarter.
Employment gains offset by shorter work hours
The rebound in total hours worked reflected a 0.8% increase in the number of jobs, while hours worked per job decreased 0.4%.
Service-producing businesses drove most of the growth in hours worked with a 0.6% increase, while hours worked in goods-producing businesses remained essentially unchanged.
Hours worked increased in 10 of the 16 main industry sectors and were flat in accommodation and food services.
Labour costs decline for first time in over a year
Unit labour costs—the cost of labour required to produce one unit of output—declined 0.3% in the first quarter, marking the first decrease in five quarters.
The decline reflected a sharp slowdown in hourly compensation growth, which fell from 1.6% in the fourth quarter of 2024 to a slight decrease of 0.1% in the first quarter of 2025, while productivity continued to increase.
