Canada Fourth Quarter Capacity Utilization Report (Text)

The following is the text of Canada’s capacity utilization report for the fourth quarter released by Statistics Canada.

Canadian industries operated at 80.7% of their production capacity in the fourth quarter, down slightly from the 81.1% in the third quarter. The decline was a result of lower capacity utilization in the manufacturing sector.

The 2.1 percentage point decline in the manufacturing sector in the fourth quarter was partly offset by gains in the non-manufacturing sector.

Manufacturing sector: Transportation equipment and food industries lead the decline

The manufacturing sector operated at 80.2% of its capacity in the fourth quarter, 2.1 percentage points lower than in the previous quarter.

The decline was largely attributable to transportation equipment manufacturing and food manufacturing, though most other industry groups were also down. Of the 21 major groups in the manufacturing sector, 14 reduced their capacity utilization.

In the transportation equipment manufacturing industry, capacity utilization fell 3.5 percentage points to 88.9% in the fourth quarter. Real gross domestic product in motor vehicle manufacturing, a sub industry of transportation equipment, shrank 5.2% in the fourth quarter, partly because seasonal shutdowns in the industry were of longer duration than in recent years.

For food manufacturers, capacity use experienced its largest quarterly decline ever, falling from 78.1% in the third quarter to 73.8% in the fourth quarter. Sharply reduced output of meat products was a key factor in the decline.

Lower production of agricultural, construction, and mining and oil and gas field machinery pushed the machinery industry’s capacity utilization rate down 3.5 percentage points to 81.5%.

In the fabricated metal products industry, capacity use fell from 83.5% to 80.0% as a result of weaker demand for metal work.

Capacity utilization was higher in the petroleum and coal products manufacturing industry and, to a lesser extent, the paper, chemical products and wood products industries.

Non-manufacturing sector: Widespread increases

In the non-manufacturing sector, there was a widespread increase in capacity utilization in the fourth quarter. This compensated for part of the sharp decline in the manufacturing sector.

Increased crude petroleum extraction was the main reason for a 2.2 percentage point rise in the oil and gas extraction industry’s capacity use to 85.7%.

An increase in metallic and non-metallic mineral mining pushed the mining and quarrying industry’s capacity utilization rate upward in the fourth quarter to 60.8%.

The construction industry operated at 79.7% of its capacity, up 0.8 percentage points from the previous quarter. This advance was attributable to growth in all types of construction.

Average annual rate up for the third straight year

Compared with 2011, the capacity utilization rate of Canadian industries rose 1.3 percentage points to 81.0% in 2012. This was the third consecutive annual increase following an unbroken string of declines that started in 2005.

In 2012, the average annual rate of capacity utilization in the manufacturing sector was 81.7%, up from 79.8% in 2011. The transportation equipment manufacturing industry was a major factor in the increase. However, this rate was well below the record high of 86.0% reached in 2000.

Advances in the capacity use in the manufacturing sector in 2012 was because of both higher output and lower production capacity, which resulted from an investment in facilities and equipment that was not sufficient to offset depreciation and other losses of assets.

Compared with 2011, the industries with the largest percentage-point gains in capacity use in 2012 were transportation equipment manufacturing, textile mills and wood product manufacturing. The largest declines were in forestry and logging as well as in the computer and electronic product manufacturing industry.

Note to readers

The industrial capacity utilization rate is the ratio of an industry’s actual output to its estimated potential output. For most industries, the annual estimates are obtained from the Capital and Repair Expenditures Survey while the quarterly pattern is derived from output-to-capital ratio series, the output being the real gross domestic product at basic prices, seasonally adjusted, by industry.

This program covers all manufacturing and selected non- manufacturing industries.

At the time of this release, rates have been revised back to the first quarter of 2011 to reflect updated source data. In particular, the annual benchmarks for manufacturing industries for 2011 and 2012 have been revised to incorporate the results of the Capital and Repair Expenditures Survey.

To contact the reporter on this story: Ilan Kolet in Ottawa at ikolet@bloomberg.net

To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net

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