Industrial capacity utilization rates

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Industries operated at 78.9% of their capacity in the second quarter, down from 79.6% in the first quarter. Capacity utilization fell for a fourth straight quarter as a result of weak exports. The automobile and wood products sectors were especially hard hit by reduced foreign demand.

However, the drop in the rate, which affected all sectors in the second quarter, was less pronounced than in the two previous quarters.

Weak foreign demand leads to slowdown in the manufacturing sector

Manufacturers reduced their production capacity utilization for a fourth straight quarter, operating at 76.7% compared with 77.2% in the first quarter. The transportation equipment, wood products, and plastic and rubber products industries played a large part in lowering the rate in the manufacturing sector.

Capacity utilization in the transportation equipment manufacturing industry fell 2.4 points to 74.5%. The slowdown in US demand for automobile products was a major contributor to the 2.5% decline in output in the transportation equipment manufacturing industry.

Manufacturers of wood products used less of their production capacity in the second quarter with their rate falling from 66.8% to 65.0%. This was the lowest utilization rate since the first quarter of 1991 when it was at 62.1%. Wood products output declined 3.3% because of weak US demand.

Among manufacturers of plastic and rubber products, the rate slid from 66.9% to 63.9%. Lower output of automobile products continued to negatively impact the manufacture of tires and plastic parts for vehicles. As a result, output fell by 2.8% in this industry.

On the other hand, strong results posted by machinery manufacturers and the petroleum and coal products industries softened the decline in the rate in the manufacturing sector.

Machinery manufacturers increased their production capacity utilization with the rate climbing to 84.5%, up 4.0 points from the previous quarter. Increased production of machinery for agriculture, construction and mining extraction, along with machine tools for metal working, was the catalyst behind this situation.

After posting lower levels in two straight quarters, manufacturers of petroleum and coal products sharply increased their capacity utilization, climbing 5.2 points from the first quarter to a utilization rate of 82.9%. Output in this sector rose 5.9% in the second quarter.

General decline in the rate in sectors other than manufacturing

The decline in the utilization rate, while general, was especially pronounced in the forestry, mining and electrical power sectors.

The forestry sector continues to experience difficult times. The slowdown in the American economy has hit wood products especially hard and sales have dropped. As a result, output in this sector declined 4.3% and the rate fell from 76.8% to 74.8%. This was the lowest rate since the first quarter of 2002, when it reached 71.1%.

In the mining sector, the rate fell from 75.7% to 73.1%. Increased production from mines was insufficient to counter the sizeable decline in drilling operations of natural gas because of high inventory levels, which drove producers to reduce output in the second quarter.

In the electrical power sector, capacity utilization declined 1.5 points to 84.7% in the second quarter. Demand for electricity fell between April and June given few extremes of temperatures during this period.

Available on CANSIM: table 028-0002.

Definitions, data sources and methods: survey number 2821.

Data on industrial capacity utilization rates for the third quarter of 2008 will be released on December 12.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Mychèle Gagnon (613-951-0994), Investment and Capital Stock Division.

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