06:47 AM EDT, 09/06/2024 (MT Newswires) -- The Bank of Canada (BoC) specifically pointed to still-solid wage gains "relative

to productivity" as an inflation concern in its policy statement on Wednesday, noted Bank of Montreal (BMO).

Solid wage growth isn't a pressure point if it is coincident with decent productivity growth. Sadly, Canada again saw an outright drop in output per hour in Q2, matching the 0.7% y/y decline pace, said the bank.

However, the productivity report wasn't all bad news for the BoC and inflation, stated BMO. Compensation growth in the business sector cooled to 2.9% y/y, in line with the 20-year average.

Even with dismal productivity, this helped chill the annual growth rate in unit labor costs (ULC) to 3.5% y/y, within shouting distance of the long-run mean, pointed out the bank.

However, public sector pay growth is still running a bit hot, so the overall economy saw compensation rise 3.8% y/y, and overall ULC growth stuck at 4.5%, or 2 ppts above the long-run norm. That has cooled a touch but remains too strong for full BoC comfort, added BMO.