Production capacity usage up in third quarter

Canadian industries operated at 78.1 percent of their production capacity in the third quarter, up from 76.9 percent in the second quarter, according to Statistics Canada’s Industrial capacity utilization rates for third quarter 2010. This was the fifth consecutive increase since the record low rate of 67.8 percent in the second quarter of 2009. The current rate remains below levels prior to the economic downturn.

The increase of 1.2 percentage points between the second and third quarters this year was slower than the gains during the three previous quarters.

The third-quarter increase was driven by the manufacturing sector, where the rate of capacity use climbed from 78.7 percent to 81.2 percent. The rate of capacity use in the manufacturing sector has been on an upward trend since the second quarter of 2009, when it reached a record low of 64.8 percent. The current rate of 81.2 percent is comparable to the rate in the fourth quarter of 2007.

Of the 21 major industries in manufacturing, 15 posted gains in capacity use in the third quarter, while six recorded declines. The biggest contributors to increased capacity use in manufacturing were the transportation equipment, machinery, fabricated metal products, computer and electronic products, primary metal, and food industries.

Among manufacturing industries in which capacity use fell, wood products, printing and related support activities, and non-metallic mineral products contributed the most to limiting the overall increase.

In the transportation equipment industry, capacity use rose from 70.3 percent to 74.3 percent, mainly the result of higher demand for motor vehicles. Machinery manufacturers raised their capacity use to 85.4 percent, the third highest level on record for this industry. The third-quarter gain of 8.7 percentage points followed strong increases of 6.7 and 6.9 percentage points in the previous two quarters. In the fabricated metal products manufacturing industry, factories increased capacity use from 71.9 percent to 76.7 percent.

For most non-manufacturing industries, third-quarter utilization rates underwent modest changes. Forestry and logging was the only industry to record a significant gain, with the rate rising from 90.8 percent to 95.9 percent. The mining sector, excluding oil and gas extraction, operated at 72.1 percent capacity use in the third quarter, down 1.4 percentage points. This was mainly a result of weaker activity in the non-metallic mineral mining industry. Still, the third-quarter rate for mining was well above the record low of 50.8 percent in the third quarter of 2009, reflecting strengthening demand in this industry. In the oil and gas extraction sector, capacity use rose slightly. Capacity use in the construction industry stayed unchanged at 71.8 percent, as a result of a reduction in repair expenditures.

In the electric power generation, transmission and distribution industry, the utilization rate edged down 0.5 percentage points to 76.1 percent as a result of flat demand. This continued a steadily declining trend in capacity use from 90.1 percent in the fourth quarter of 2007.

Note to readers: The industrial capacity utilization rate is the ratio of an industry’s actual output to its estimated potential output. The measures of actual output used in the production of the rates of capacity use are the measures of real gross domestic product at factor cost, seasonally adjusted, by industry. With this release, rates have been revised back to the first quarter of 2008 to reflect the revised source data.

www.statcan.gc.ca