Wednesday, June 11, 2008

Canadian industries slash production capacity rate

Canadian industries slashed their production capacity in the first quarter, Statistics Canada said Wednesday.

Industries operated at 79.8 per cent of their capacity in the first quarter, down 4.1 per cent from the same period a year ago and down two per cent to 81.8 per cent in the fourth quarter, the federal agency said in a release on industrial capacity utilization rates.

Analysts at BMO Capital Markets expected the rate to drop to 80.8 per cent in the quarter.

Most of the sectors that make up the industrial group, particularly the automotive sector, contributed to the decline, Statistics Canada said. Only the oil and gas extraction sector posted an increase in capacity utilization.

The utilization rate compares actual production to estimated maximum output. It is a measure of how far the industrial economy is from its current potential.

In the manufacturing sector, every major group except leather products posted a reduction in capacity use. Its rate fell to 77.2 per cent in the first quarter from 80.3 per cent in the fourth quarter. It was the first time the rate fell below 80 per cent level since 2000.

"Once again the special factors that plagued the auto sector in the first quarter played out in this report with the transportation equipment industry’s capacity utilization rate falling to 77.2 per cent, the lowest since 1994," RBC assistant chief economist Dawn Desjardins said in a research note.

"The oil and gas sector saw its rate rise to 81.7 per cent due to an increase in crude oil production with natural gas falling in the quarter," she said.

Rates drop in most sectors

In the forestry and logging sector, the rate fell 77.0 per cent in the first quarter, down 79.8 per cent in the fourth quarter, Statistics Canada said. Weak demand for wood products was at the root of a 5.2 per cent drop in production.

In the mining sector, the rate fell to 75.8 per cent from 77.5 per cent. The decline in output of non-metallic mines was a significant factor in the 1.6 per cent drop in production.

In the construction sector, the rate fell to 84 per cent from 84.9 per cent.

In the oil and gas extraction sector, the rate rose to 81.7 per cent from 80.9 per cent. This was attributed to an increase in crude oil production, given that natural gas production fell in the first quarter.



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