Statistics Canada says productivity indicators for Canadian businesses rose 1.4 per cent in the fourth quarter, the highest quarterly growth rate since 1998.

The spike was also the first increase in productivity since the third quarter of 2008, the statistics agency said Tuesday.

"That doesn’t quite erase the dreadful performance of the past three-plus years, which had seen productivity essentially stagnate," BMO economist Doug Porter said.

"But overall, better productivity and subdued costs could suggest to the Bank of Canada that the economy has a higher speed limit than previously believed in this recovery."

Productivity is measured by gross domestic product output per hour worked and is considered a key driver of improvements in the standard of living.

Hours worked were unchanged in the fourth quarter, after increasing 0.3 per cent in the third. But employment edged up 0.1 per cent, while hours worked per job fell by the same amount.

Both goods-producing and service-producing sectors made positive contributions to the upturn in business productivity in the fourth quarter, the agency said.

Productivity rose by 1.7 per cent at goods-producing companies, after three quarters of declines. The growth was widespread, but manufacturing was a standout, with a 2.1 per cent advance.

Productivity in the service-producing industries increased one per cent, its fourth straight quarterly gain. The largest increases were in wholesale trade, retail trade and information and cultural services.

Labour costs per unit of production in Canadian dollars were unchanged for Canadian businesses in the fourth quarter, after edging down 0.1 per cent the previous quarter.

Flu impact

Tuesday's productivity release also revealed interesting data on the economic impact of H1N1 and seasonal flu on 2009 as a whole. The second wave of influenza A (H1N1), the seasonal flu and the vaccination campaign in November and December 2009 resulted in the loss of 27 million hours worked across the country, the agency said.

But hours lost due to illness in the fourth quarter were not significantly different from hours lost due to illness in previous years.

Since 2000, the proportion of hours lost because of illness or child-care obligations in the fourth quarter has ranged from 2.7 per cent in 2001 to 3.2 per cent in 2006. The proportion in the fourth quarter of 2009 was 3.1 per cent.