Capacity Utilization for Canadian Industries Increases in 4Q

Canadian industries operated at 70.9% of their production capacity in the fourth quarter, up from 68.7% in the third quarter. Following a marginal gain of 0.2 percentage points in the third quarter, the gain in the fourth quarter was the first sizeable increase in overall capacity use since the first quarter of 2007.

In the manufacturing industries, capacity use rose from 67.7% to 69.7%. This was the second consecutive increase after nine quarters of decline. However, capacity use for manufacturers remained 3.8 percentage points lower than the rate of 73.5% in the fourth quarter of 2008. It was also well below the most recent peak of 84.9% in the first quarter of 2006.

All non-manufacturing sectors posted sizeable gains in capacity use in the fourth quarter, following widespread declines in the third quarter. Two sectors – forestry and logging, and mining – led the growth.

Manufacturing
Of the 21 major manufacturing industries, 13 posted higher capacity use in the fourth quarter. Four industries were major contributors to the higher rate for total manufacturing: transportation equipment; primary metal; paper; and chemical manufacturing.

Capacity use in the transportation equipment industry rose from 55.9% to 59.7%, the highest rate since the third quarter of 2008. Manufacturers of motor vehicles and motor vehicle parts were largely responsible for the 4.1% increase in output for this industry.

Primary metal manufacturers used 75.6% of their production capacity in the fourth quarter, up from 67.3% in the third quarter. This 8.3 percentage-point increase halted four consecutive quarterly declines. Production of primary metal increased 7.4%, largely on the strength of iron and steel mills and ferro-alloy production, and non-ferrous metal (except aluminum) production and processing.

In the paper manufacturing industry, the utilization rate rose from 77.5% to 83.5%. This reflected the first gain in output after 19 consecutive quarterly declines.

The chemical manufacturing industry operated at 75.7% of its capacity in the fourth quarter, up from 72.8%. The main contributing factor was higher production by resin, synthetic rubber, and artificial and synthetic fibres and filaments manufacturers, as well as by pharmaceutical and medicine manufacturers.

Food manufacturers reduced their capacity use by 0.9 percentage points to 80.0% in the fourth quarter. The decline was mostly the result of lower production by bakeries and tortilla manufacturers, and by grain and oilseed mills.

Non-Manufacturing
In the non-manufacturing group, capacity use rebounded in all sectors in the fourth quarter following widespread declines in the third quarter.

In oil and gas extraction, increasing demand led to higher production of crude petroleum in the fourth quarter, more than offsetting lower output in natural gas facilities. As a result, the utilization rate rose from 76.2% to 78.0%.

In mining, capacity use advanced from 50.7% to 57.6%. A significant increase in the output of support activities played an important role in the gain.

In the construction sector, the utilization rate settled at 70.2% in the fourth quarter, up from 69.1% the previous quarter. However, the rate was still 6.5 percentage points lower than in the fourth quarter of 2008. The major contributing factor to fourth-quarter growth in this sector's output was a large increase in residential building construction activity.

The forestry and logging sector operated at 75.5% of its capacity in the fourth quarter, up from 64.5% the previous quarter. This 11 percentage-point increase was the largest quarterly gain since the second quarter of 2002. Robust growth in residential construction was a key factor to the 13.3% increase in the production of this sector.

Source: Statistics Canada