Recent statistics reveal that business productivity in Canada declined by 1% during the second quarter of 2025, marking the largest drop since the end of 2022. This decrease highlights the economic challenges Canada is facing amid both domestic and global pressures.
The report identifies several sectors contributing to the drop:
Manufacturing, affected by reduced output due to global market uncertainties.
Wholesale trade, which experienced lower demand.
Certain service sectors, where productivity was curtailed due to cost pressures.
The Bank of Canada described the situation as part of a “vicious circle” impacting economic growth:
Weak investment → lower productivity → limited wage growth → reduced demand → companies invest less → productivity remains low.
Lower productivity means the Canadian economy struggles to increase output relative to available resources, potentially putting pressure on GDP growth and financial markets.
Encourage investment in infrastructure and modern technologies across productive sectors.
Support competition in key industries to stimulate innovation and efficiency.
Focus on workforce development through continuous training and education.
Increase investment in housing to support sustainable growth and reduce urban pressures.
Economists believe that improving productivity has become an urgent necessity to maintain Canada’s economic stability and ensure that companies remain globally competitive. Without effective intervention from both the government and private sector, the economy may continue facing pressure on labor, wages, and productivity.
