Industrial capacity utilization rates

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Canadian industries reduced their use of production capacity for a fifth straight quarter in the third quarter, with a majority of sectors, especially the automobile and construction sectors, contributing to the downturn.

Industries operated at 77.4% of their capacity, down from 77.7% in the second quarter. This was the rate's lowest level since data were first kept in 1987. The rate in the third quarter of 2008 was 9.7 percentage points below its peak of 87.1% reached in the fourth quarter of 2000.

Chart 1
Capacity utilization falls to lowest level on record

In the transportation equipment manufacturing industry, almost two-thirds of which consists of automobile and parts manufacturers, capacity utilization fell for the fourth consecutive quarter. The rate declined from 73.8% to 71.1%, the lowest since the fourth quarter of 1992 and well below the peak of 92.2% in the first quarter of 2000.

Lowest rate in 15 years in manufacturing sector

In the manufacturing sector, industries used 78.0% of their production capacity in the third quarter, the lowest level in 15 years. This was a decline from 78.2% in the second quarter.

Capacity use increased in 14 of the 21 major groups in the manufacturing sector. But these increases were not enough to offset declines in four groups: transportation equipment; fabricated metal products; plastics and rubber products; and petroleum and coal products manufacturing.

Chart 2
Fifth straight quarterly decline in the manufacturing sector

In the transportation equipment manufacturing industry, a slowdown in both domestic and foreign demand for automobile products was a major contributor to a 2.9% decline in production.

Slower demand for automobile products also had a negative impact on the production of tires and plastic parts for vehicles, fuelling a 1.3% decline in output in the plastics and rubber manufacturing industry. As a result, the industrial capacity utilization rate fell 1.6 points to 65.3%, the lowest rate ever posted by this industry.

In the fabricated metal products manufacturing industry, capacity utilization slid from 78.0% in the second quarter to 76.8% in the third quarter. Much of the 1.4% decrease in fabricated metal products output was attributable to architectural and structural metals manufacturing.

Industrial capacity utilization fell sharply in the petroleum and coal products manufacturing industry, in response to a 3.3% cutback in output by refineries because of production problems at two major plants. The rate dropped to 76.3%, compared with 79.9% in the previous quarter.

On the other hand, the primary metals manufacturing industry sharply increased its capacity utilization in the third quarter. Strength in foreign demand for iron and steel products contributed to a 6.3% rise in output in this industry and capacity use increased from 92.9% to 96.1%. This was the rate's highest level since the first quarter of 1988 when it reached 96.3%.

Chemical products manufacturing posted its third straight quarterly increase as the rate rose 1.6 percentage points to 80.8%. Most of the main components of this group, and especially pharmaceutical and medicine manufacturing, contributed to the 1.3% rise in output in this industry.

In the paper products manufacturing industry, capacity utilization climbed from 86.0% to 87.8% as a result of a decline in production capacity. This decline was due to the fact that the depreciation in the paper manufacturing industry's assets exceeded investments.

Mining sector on the rise

The mining sector ended three straight quarters of declining rates with an increase in capacity utilization from 69.3% to 72.6%. Growth in metal mining production and the strength of oil and gas extraction support activities were major contributors to a 7.4% increase in this sector's output.

In the construction sector, capacity utilization declined 1.2 percentage points to 75.9%. Increased residential construction and engineering works were unable to offset the growth in production capacity.

In the forestry and logging industry, the rate slid from 75.3% to 70.4%, driven by an 8.8% drop in output. This was the rate's lowest level on record. Weak residential construction in the United States continued to have a negative impact on this sector.

Available on CANSIM: table 028-0002.

Definitions, data sources and methods: survey number 2821.

Data on industrial capacity utilization rates for the fourth quarter of 2008 will be released on March 16, 2009.

For more information, or to enquire about the concepts, methods and data quality, contact Michel Labonté (613-951-9690), Investment and Capital Stock Division.

Table 1
Industrial capacity utilization rates