{"id":321720,"date":"2025-12-03T01:49:10","date_gmt":"2025-12-03T01:49:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/321720\/"},"modified":"2025-12-03T01:49:10","modified_gmt":"2025-12-03T01:49:10","slug":"why-canadas-productivity-might-not-be-as-terrible-as-you-think","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/321720\/","title":{"rendered":"Why Canada’s productivity might not be as terrible as you think"},"content":{"rendered":"\n

Canada\u2019s productivity crisis<\/a> might not be as dire as thought after Statistics Canada significantly revised its gross domestic product (GDP)<\/a> data for 2022, 2023 and 2024.<\/p>\n

The agency on Friday said Canada\u2019s economy expanded 1.7 per cent more than believed during those three years.<\/p>\n

Derek Holt, vice-president and head of capital markets economics at Bank of Nova Scotia, said the revisions were \u201chuuuuuuge,\u201d pointing out they added 0.5 per cent of growth in each of the three years.<\/p>\n

The revisions mean quarter-over-quarter GDP for the final period of 2024 rose three per cent instead of 2.3 per cent, Douglas Porter, chief economist at BMO Capital Markets, said.<\/p>\n

\u201c(The revisions) didn\u2019t come out of the clear blue sky,\u201d he said. \u201cWe had actually seen the provincial estimates for growth a couple of weeks prior, and that usually acts as a little bit of a signal that things could be revised up. And so we were certainly watching for it, and it was confirmed.\u201d<\/p>\n

The revisions were not a result of any change in labour data, but because of more consumer spending and increased business investments.<\/p>\n

Based on the revisions, productivity will get a bit of a makeover.<\/p>\n

Productivity for 2022 originally fell 0.6 per cent, with Porter estimating that will be close to zero now. In 2023, productivity fell by 2.1 per cent, but he said the GDP revision \u201cwon\u2019t save that year. It will be bad.\u201d Last year, productivity grew 0.1 per cent, but he estimates that will be closer to 0.5 per cent now.<\/p>\n

\u201cMake no mistake, it\u2019s still a disappointment,\u201d he said. \u201cBut it\u2019s not quite the disaster that it looked like a year or two ago.\u201d<\/p>\n

Bank of Canada<\/a> senior deputy governor Carolyn Rogers turned productivity into a national talking point in early 2024 after she said the country faced an \u201cemergency\u201d brought on by weak investment in workers and technology.<\/p>\n

Productivity in Canada has also lagged that of the United States, where it grew 1.5 per cent in the second quarter from the same time a year ago. In Canada, productivity only grew 0.03 per cent during the same period.<\/p>\n

A fresh look at productivity comes Wednesday when Statistics Canada releases third-quarter data. Economists tracked by Bloomberg are estimating it grew 0.5 per cent.<\/p>\n

The revisions could also untangle a few other concerns regarding the state of the Canadian economy.<\/p>\n

Holt said they mean there is less slack in the economy than previously thought. The economy producing less than it can has been a major concern of economists and provided them an argument for why policymakers should continue to cut interest rates.<\/p>\n

The Bank of Canada, which cut its rate by 25 basis points to 2.25 per cent at the end of October, said in its last interest rate decision that \u201cexcess capacity in the economy is expected to persist.\u201d<\/p>\n

However, some economists now think that slack, pegged at minus 1.1 per cent by the Bank of Canada in its October Monetary Policy Report, has reversed and is in positive territory, leaving supply tighter.<\/p>\n

\u201cIt is now fair to question the strength of (Bank of Canada\u2019s) conviction regarding the extent of economic slack \u2014 particularly in an environment where trade uncertainty and weak business investment have distorted traditional capacity signals,\u201d Stefane Marion, chief economist at National Bank of Canada, said in a note that estimated the slack at 0.5 per cent.<\/p>\n

However, Porter doesn\u2019t think slack has evaporated and the economy is operating at more than full capacity, especially given the impact of U.S. tariffs on sectors such as steel, aluminum, forestry and automobiles.<\/p>\n

Instead, he thinks the Bank of Canada will \u201cfinesse\u201d the numbers, but stick with the scenario that the economy isn\u2019t producing as much as it can.<\/p>\n

\u201cI believe the most important indicator they would look at would be the unemployment rate, and it certainly suggests there is still some slack in the economy,\u201d he said.<\/p>\n

Canada\u2019s unemployment rate<\/a> was 6.9 per cent in October. The November figure will be released on Friday.<\/p>\n

Holt agrees the Bank of Canada could adjust slack to land \u201csomewhere in the middle\u201d between minus 1.1 per cent and 0.5 per cent as the revised GDP numbers were based on an increase in demand and capacity.<\/p>\n

He also said the reduced slack could explain why inflation has been somewhat sticky. It came in at 2.2 per cent year over year in October, while the Bank of Canada\u2019s preferred core measures remain stuck around the three per cent mark.<\/p>\n

\u201cThe net effect could see the Bank of Canada revise its inflation outlook higher when it publishes a fresh forecast at the end of January in the next (Monetary Policy Report),\u201d he said in a note. \u201cIt already expected inflation to persist just above the two per cent inflation target in 2026 and 2027. It may go higher.\u201d<\/p>\n

If so, Holt said that should put any further interest rate hikes on the back burner.<\/p>\n

\u201cThis emboldens our view that the (Bank of Canada) is sidelined for an extended period,\u201d he said.<\/p>\n

\u2022 Email: gmvsuhanic@postmedia.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Canada\u2019s productivity crisis might not be as dire as thought after Statistics Canada significantly revised its gross domestic…\n","protected":false},"author":2,"featured_media":321721,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[52,45,49,48,85105,142700,36795,46,149,50],"class_list":["post-321720","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-bank-of-canada","tag-business","tag-ca","tag-canada","tag-canadas-economy","tag-derek-holt","tag-douglas-porter","tag-economy","tag-productivity","tag-statistics-canada"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/321720","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=321720"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/321720\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/321721"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=321720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=321720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=321720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}