Productivity dropped 0.8 percent during the quarter after small increases in the second and third quarters of 2007, the report said.

On the year, productivity increased 0.5 percent, which was the lowest gain since 2004, the report said.

The fourth quarter drop was due to declines in professional, scientific and technical services, construction, mining and oil extraction.

By comparison, productivity rose only 0.2 percent in the fourth quarter in the United States, while it rose 1.6 percent in the third quarter and 1.9 percent on the year.

Labor cost per unit, a measure of how much inflation is pushed by wages, rose 1.4 percent in the fourth quarter in Canada, as hourly compensation, wages and benefits rose 0.6 percent.