Topic of the week

The U.S. economy is reaping the benefits of astounding labour productivity growth. Unfortunately, the same cannot be said of the Canadian economy. Our analysis confirms that the contraction in Canadian labour productivity does not derive from the effect of labour being reallocated from the manufacturing sector to the service sector. Investment in machinery and equipment (IME) declined further in Canada than in the United States during the recent recession and the IME-to-GDP ratio has dropped even lower this side of the border. Moreover, Canadian businesses do not seem inclined to take advantage of the soaring loonie to build up their capital stock more rapidly. We can only hope that the IME-to-GDP ratio in Canada will begin to trend up very soon in order to ensure a good purchasing power for Canadians in the years ahead.