Canadian 1Q Capacity Utilization Edges Up 1Q

Canadian industries slightly increased the use of their production capacity during the first quarter of  ; 2007, halting four consecutive quarters of decline.

  ;
Capacity utilization edged up from  ; 82.4% in the fourth quarter of  ; 2006  ; to  ; 83.0%. This level was  ; 3.0  ; points below the rate posted in the fourth quarter of  ; 2005, before the quarterly drops observed in  ; 2006.
  ;
The industrial capacity utilization rate is the ratio of an industry's actual output to its estimated potential output. For this release, rates have been revised back to the first quarter of  ; 2005  ; to reflect the revised source data.
  ;
Production rose slightly in the large manufacturing sector, but capacity use remained unchanged, tempering the first-quarter increase.
  ;
Gains in production in February and March were just enough to offset the substantial decline in production in the manufacturing sector in January. Automotive production had plunged by almost  ; 12% in January, as a result of declining demand for light-duty motor vehicles and heavy trucks.
  ;
Nonetheless, manufacturers remain optimistic in their production outlooks. According to the April 2007  ; Business Conditions Survey, they planned to increase production in the second quarter.
  ;
Three other sectors (forestry and logging, mining and oil and gas extraction, and electric power) posted good results, and together accounted for the increase in industrial capacity use in the first quarter. The only sector to post a lower rate in the first quarter was the construction sector.
  ;
Manufacturing sector halts three straight quarterly declines
After three consecutive quarterly decreases, the capacity utilization rate for the manufacturing sector remained unchanged at  ; 81.1%, the same level as in the fourth quarter of  ; 2006.
  ;
Among the  ; 21  ; industry groups in the manufacturing sector,  ; 14  ; recorded an increase in industrial capacity utilization. Higher rates in the primary metal, chemical products and fabricated metal products industries were offset by lower rates in the food, plastic and rubber products and wood products manufacturing industries.
  ;
Strong export demand for primary metals in Asia and the dizzying rise in nickel and copper prices led to a  ; 2.1% production increase in the first quarter. The rate of capacity use for primary metals rose from  ; 89.2% in the fourth quarter of  ; 2006  ; to  ; 91.5% in the first three months of  ; 2007.
  ;
In the chemical products manufacturing industry, capacity utilization reached its highest level in more than four years (84.5%), up  ; 1.5  ; points from the previous quarter. Despite the negative impact of the railway strikes, which disrupted the supply chain for chemical product manufacturers in February, production rose by  ; 1.3% in the first quarter.
  ;
Production of fabricated metal products was  ; 2.0% higher in the first quarter, as output increased for the majority of primary components of this industry group. After posting three straight quarterly decreases, the rate rose by  ; 1.4  ; points to  ; 79.4%.
  ;
Food manufacturers greatly reduced their capacity utilization, from  ; 79.7% in the fourth quarter of  ; 2006  ; to  ; 77.0% in the first quarter of  ; 2007. This was the food industry's lowest rate since the second quarter of  ; 1990, when it was  ; 76.8%. The majority of the main components in this industry group, canned fruit and vegetable manufacturers in particular, accounted for the  ; 2.2% decline in production for this industry.
  ;
Manufacturers of plastic and rubber products posted a fifth consecutive quarterly decline in their rate. Capacity utilization was  ;

70.2%, down from  ; 72.9% in the previous quarter. Production fell  ; 12.4% for tire manufacturers, reflecting the weakness in automotive production as most of the demand for automotive products was met by inventories. This decline was responsible for much of the  ; 2.3% decline in production in plastic and rubber products.
  ;
A dampening of foreign demand for wood products resulted in a  ; 1.1% decrease in production in the first quarter. Accordingly, capacity utilization fell  ; 1.6  ; percentage points to  ; 76.4%. This was the lowest rate posted by this industry since the first quarter of  ; 1992, when the rate was  ; 76.1%.
  ;
Increase for majority of other sectors
Capacity utilization in the forestry and logging sector reached  ; 88.1% in the first quarter, up from  ; 82.2% in the previous quarter. Production rose by  ; 6.0% in the first quarter, as milder weather allowed for more cutting than usual in January.
  ;
In the electric power sector, capacity utilization posted its strongest increase in over two years, as the rate rose from  ; 83.3% to  ; 86.6%. The return to more seasonal temperatures in February pushed up the demand for electricity, and production in this sector rose by  ; 3.6% in the first quarter.
  ;
In the oil and gas extraction sector, crude oil production rose in response to foreign demand, while the increase in natural gas production served to replenish stocks.
  ;
Accordingly, industrial capacity utilization rose by  ; 2.1  ; points to  ; 83.6%.
  ;
In the mining sector, the rate edged up from  ; 82.1% to  ; 82.8% during the first three months of  ; 2007, owing to an increase in non-metallic mineral mining (including diamonds). Coal and metal mines reduced their production activities in the first quarter.
  ;
The construction sector alone used less of its production capacity in the first quarter. The rate slipped from  ; 86.2% to  ; 85.9%, as an increase in production capacity exceeded the growth in production.