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The Daily. Tuesday, September 26, 2000
The business sector recorded a 1.5% gain in multifactor productivity in 1999, more than twice the annual average during the previous decade.
While the increase fell short of the growth rate of 2.8% in 1997, it was up sharply from 1998's anemic growth of 0.1%. Between 1988 and 1999, multifactor productivity grew at an annual average rate of 0.7%.
The 1999 gain occurred in a context of robust economic growth (+4.8%) and the most rapid increase in the labour input in the 1990s. That is, workers produced more, substantially increasing economic output, and they put in 3.5% more hours.
The 1999 growth in multifactor productivity was slightly greater than the 1.4% growth in labour productivity announced in The Daily on May 1.
Productivity growth - the efficiency with which the economy transforms inputs into output - is important because it largely determines the increase in real income. Productivity can be measured in different ways: Labour productivity measures the growth of output per hour worked; multifactor productivity, a broader indicator, measures the productive efficiency of labour input and capital input in combination. A measure of labour productivity reflects not only changes in efficiency of labour but also changes in the availability of capital per hour worked - a result of capital accumulation. In contrast, multifactor productivity growth represents the increase in output beyond that explained by the mere increases in inputs, and therefore more closely captures an increase in output attributable to technological and organizational advance.
Overall productivity growth in 1999 was due mainly to the performance of the goods-producing sector, which posted a 2.7% gain, compared with a decline of 0.6% in 1998. The services sector only mustered a modest 0.8% gain, compared with a 0.6% increase in 1998.
Productivity growth trends, a measure of technical progress, emerge more clearly over longer time periods. Changes from year to year often reflect the impact of unexpected random shocks. To assess the long-term productivity trend, the average annual growth rates from the peak of one business cycle to the next are generally used.
During the decade between 1988 and 1999, multifactor productivity in the business sector grew at an annual average rate of 0.7%. This performance was well below the 2.3% recorded during the business cycle from 1966 to 1973. Nevertheless, it was better than the annual average growth of 0.6% between 1973 and 1979, and the annual average of 0.4% between 1979 and 1988.
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The stronger performance between 1988 and 1999 was due to the goods-producing sector. Average annual productivity gains in this sector of 1.2% between 1988 and 1999 were roughly double those recorded during the two previous business cycles (1973 to 1979 and 1979 to 1988).
Manufacturing, a major component of the goods-producing sector, recorded an annual average growth of 1.6% in multifactor productivity between 1988 and 1999. This almost equalled its strong growth between 1973 and 1979. In contrast, other industries in the goods-producing sector, except for agriculture, performed much more modestly.
Between 1988 and 1996, multifactor productivity of the top-performing manufacturing industries grew at an annual average rate of 3.0%, compared with 0.7% for the bottom-performing industries. While both improved their performance compared with the 1979-1988 period, the bottom-performing industries gained most, 1.2 percentage points.
The group of top-performing industries is generally dominated by manufacturing industries, such as refined petroleum and coal products and chemical and chemical products industries, that are intensive users of raw materials.
Despite an annual average multifactor productivity increase of 4.5% between 1988 and 1996, high-tech industries such as electrical and electronic products ranked only fourth among the best-performing industries. Between 1979 and 1988, they ranked fifth.
Available on CANSIM: matrices 9456-9458.
For more information, or to enquire about the concepts, methods or data quality of this release, contact John Baldwin (613-951-8588; baldjoh@statcan.gc.ca) or Tarek M. Harchaoui (613-951-9856; fax: 613-951-5403; harctar@statcan.gc.ca), Micro-Economic Studies and Analysis Division.
Sources of economic growth
| 1961 to 1999 | 1961 to 1966 | 1966 to 1973 | 1973 to 1979 | 1979 to 1988 | 1988 to 1999(p) | 1997(p) | 1998(p) | 1999(p) | |
|---|---|---|---|---|---|---|---|---|---|
| average annual growth rate (%) | |||||||||
| Business sector total | |||||||||
| Real gross domestic product | 3.8 | 6.9 | 4.9 | 3.5 | 3.1 | 2.5 | 5.3 | 3.3 | 4.8 |
| Capital | 3.8 | 4.2 | 4.5 | 4.4 | 3.9 | 2.7 | 1.8 | 3.5 | 2.9 |
| Labour | 1.9 | 3.8 | 1.5 | 2.0 | 1.9 | 1.2 | 2.9 | 3.0 | 3.5 |
| Combined inputs | 2.6 | 3.9 | 2.6 | 2.9 | 2.7 | 1.8 | 2.5 | 3.2 | 3.3 |
| Multifactor productivity | 1.2 | 2.9 | 2.3 | 0.6 | 0.4 | 0.7 | 2.8 | 0.1 | 1.5 |
| Services sector | |||||||||
| Real gross domestic product | 4.3 | 6.2 | 5.6 | 4.7 | 3.7 | 3.0 | 5.0 | 4.1 | 4.9 |
| Capital | 4.6 | 4.5 | 4.2 | 5.0 | 4.7 | 4.4 | 3.7 | 4.5 | 4.6 |
| Labour | 2.9 | 4.2 | 2.8 | 3.5 | 3.0 | 2.0 | 2.8 | 3.1 | 3.9 |
| Combined inputs | 3.5 | 4.3 | 3.3 | 4.0 | 3.6 | 2.8 | 3.0 | 3.6 | 4.1 |
| Multifactor productivity | 0.9 | 1.9 | 2.3 | 0.8 | 0.2 | 0.2 | 1.9 | 0.6 | 0.8 |
| Goods-producing sector | |||||||||
| Real gross domestic product | 3.2 | 7.4 | 4.2 | 2.4 | 2.5 | 1.8 | 5.7 | 2.1 | 4.5 |
| Capital | 3.1 | 4.0 | 4.7 | 3.9 | 3.2 | 1.2 | 0.8 | 2.5 | 0.7 |
| Labour | 0.8 | 3.5 | 0.4 | 0.5 | 0.8 | 0.1 | 3.4 | 2.8 | 2.8 |
| Combined inputs | 1.7 | 3.7 | 1.9 | 1.9 | 1.8 | 0.6 | 2.2 | 2.7 | 1.8 |
| Multifactor productivity | 1.5 | 3.7 | 2.3 | 0.5 | 0.6 | 1.2 | 3.5 | -0.6 | 2.7 |
| Manufacturing sector | |||||||||
| Real gross domestic product | 3.7 | 8.9 | 4.9 | 2.5 | 2.5 | 2.3 | 6.9 | 3.9 | 6.2 |
| Capital | 2.7 | 3.9 | 4.5 | 1.8 | 2.6 | 1.7 | 1.8 | 2.3 | 1.3 |
| Labour | 0.9 | 4.4 | 1.1 | 0.3 | 0.2 | 0.1 | 3.7 | 4.1 | 3.7 |
| Combined inputs | 1.5 | 4.3 | 2.1 | 0.8 | 1.0 | 0.7 | 2.9 | 3.3 | 2.6 |
| Multifactor productivity | 2.2 | 4.6 | 2.7 | 1.7 | 1.4 | 1.6 | 4.1 | 0.6 | 3.6 |
| p | Preliminary data. |
Manufacturing industries in descending order of their productivity gain
| average annual growth rate (%) | |||
|---|---|---|---|
| 1979 to 1988 | 1988 to 1996(p) | ||
| Refined petroleum and coal products | 15.8 | Refined petroleum and coal products | 8.9 |
| Primary textile | 5.7 | Rubber products | 8.1 |
| Wood | 5.5 | Primary metal | 4.5 |
| Chemical and chemical products | 4.4 | Electrical and electronic products | 4.5 |
| Electrical and electronic products | 3.9 | Furniture and fixtures | 3.4 |
| Transportation equipment | 2.3 | Primary textiles | 3.1 |
| Fabricated metal products | 2.2 | Chemicals and chemical products | 2.5 |
| Non-metallic mineral products | 1.9 | Textile products | 2.3 |
| Plastic products | 1.8 | Transportation equipment | 2.2 |
| Tobacco products | 1.5 | Beverages | 1.9 |
| Primary metal | 1.5 | Fabricated metal products | 1.5 |
| Leather and allied products | 1.3 | Clothing | 1.4 |
| Rubber products | 0.7 | Other manufacturing | 1.2 |
| Paper and allied products | 0.5 | Tobacco products | 1.1 |
| Clothing | 0.1 | Paper and allied products | 1.1 |
| Beverages | -0.4 | Food | 1.0 |
| Food | -0.5 | Machinery (except electrical machinery) | 0.6 |
| Textile products | -0.9 | Plastic products | 0.5 |
| Printing, publishing and allied | -0.9 | Non-metallic mineral products | -0.4 |
| Machinery (except electrical machinery) | -0.9 | Leather and allied products | -1.5 |
| Other manufacturing | -1.0 | Wood | -2.4 |
| Furniture and fixtures | -1.6 | Printing, publishing and allied | -3.6 |
| p | Preliminary data. |