StatCan report shows which sectors were main contributors to decline
Canadian business productivity declined 1.0% in the second quarter of 2025, marking the sharpest drop since the fourth quarter of 2022, Statistics Canada reported.
The decline followed virtually no change in the first quarter, which had come after a strong 1.2% increase in the fourth quarter of 2024. The last time productivity fell so sharply was in the fourth quarter of 2022, when it dropped 1.1%.
The government uses “productivity” in referring to labour productivity, which is a measure of real GDP per hour worked.
With uncertainty surrounding international trade, businesses reduced their output for the first time in seven quarters in the second quarter of 2025, says the report.
Real gross domestic product of businesses contracted 0.7% in the second quarter, after growing 0.5% in the previous quarter. This was the first contraction since the third quarter of 2023.
Meanwhile, hours worked continued to increase but at half the pace of the previous quarter, rising 0.3% compared to 0.6% in the first quarter.
Productivity by sectors in Canada
Productivity in the business sector declined due to decreases in nine of the 16 industry sectors. Manufacturing and wholesale trade were the main contributors to the decrease in business sector productivity.
Utilities recorded the largest decline at 4.0%, followed by wholesale trade at 2.6%. Manufacturing posted a significant decline of 2.1% after a quarter of zero growth, while construction posted a slight decline of 0.1%.
“These two sectors—which are heavily dependent on merchandise trade—were particularly affected by the uncertainty surrounding Canada’s trade activities with the United States during the quarter,” Statistics Canada noted.
Last year, Bank of Canada senior deputy governor Carolyn Rogers called Canada’s poor productivity record “an emergency,” noting that in 1984 Canada produced 88 per cent of the value generated by the U.S. economy per hour but that the number had declined to 71 per cent by 2022, according to the Financial Post.
Decrease in hours worked
Hours worked in the business sector grew at a slower pace in the second quarter (+0.3%) than in the first quarter (+0.6%), due to a slowdown in services-producing businesses.
In the second quarter, hours worked in these businesses rose 0.3%, after rising 0.8% in the previous quarter, while hours worked in goods-producing businesses were little changed for a second consecutive quarter, said StatCan.
Overall, hours worked were up in 10 of the 16 industry sectors in the second quarter, and they were virtually unchanged in three sectors: manufacturing, professional services and other business services.
While wildfires affected certain regions in Western Canada as well as the west of Ontario in May, some workers lost hours of work, while others worked overtime, said the report, so the net effect of the wildfires on hours worked was virtually nil in the second quarter.
