08:15 AM EST, 12/05/2024 (MT Newswires) -- Productivity growth is a key driver of living standards but also a big determinant of trade competitiveness, said Bank of Montreal (BMO).

That's why Canada's dismal performance in the manufacturing sector -- down 3.6% year over year to Q3 -- is so worrying, noted the bank. While the United States. pace isn't great, it's at least positive at 0.7%.

Consequently, the gap in unit labor cost growth on the two sides of the border is sizeable -- 7.9% versus 5.7% -- and it's not fully offset by a weaker Canadian dollar (CAD or loonie), stated BMO. And there's no sign this gap is narrowing.

Faster productivity growth allows US factory workers to enjoy better wage increases than in Canada, or 6.4% versus 4.0%, while US companies can still see relatively better profits, pointed out the bank.

It also implies, all else equal, less upward pressure on prices and

interest rates in the US, though Canada's weaker economy is a major counterweight, added BMO.