Production capacity rate dragged down by manufacturing

Ottawa – Canadian industries operated at 80.7% of their production capacity in the fourth quarter of 2012, down slightly from 81.1% in the third quarter, reports Statistics Canada. The decline was a result of lower capacity utilization in the manufacturing sector.

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.

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, 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.

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%.

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.

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.