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Wednesday, December 10, 2003
Industrial capacity utilization ratesThird quarter 2003
Industrial capacity use edged down in the third quarter, as the value of the Canadian dollar rose against its US counterpart and Ontario's industrial heartland was hit by the mid-August power blackout. Industries operated at 81.2% of their capacity in the third quarter, down marginally from 81.3% in the second quarter. This was the lowest rate since the fourth quarter of 2001, when the rate hit 80.6%. It was also 3.7 percentage points below the most recent high of 84.9% in the fourth quarter of 2000.
Domestic demand rose in the third quarter, supported by consumer spending and capital investments by businesses. However, the power outage in Ontario had a strong dampening effect on production activities in August. Combined with the value of Canadian currency, the blackout was an important factor in the downturn in exports. In September, stocks decreased for the fifth straight month. Instead of increasing production, lumber manufacturers cleared out their inventories in response to demand in the construction sector. These firms played a large role in the drop in inventory levels in the manufacturing sector in the third quarter.
Corporate profits were up in the third quarter. October's Business Conditions Survey indicated that manufacturers expected to increase production in the fourth quarter of 2003, although they were still concerned about high inventory levels and low levels of unfilled orders.
Capacity utilization rates tumbled in the forestry and logging sector, while slipping slightly in the electrical power and manufacturing sectors. Rates remained steady in the construction sector and rose in the mining and oil and gas sectors. (Capacity utilization rates have been revised back to the first quarter of 1996 to include revisions in source data.)
Widespread declines in the manufacturing sector
Manufacturers operated at 82.2% of capacity in the third quarter, down from 82.5% in the second quarter. Declines in the sector were widespread, with 14 of the 21 groups posting decreases.
A decline in production for most components of the chemical products manufacturing industry led to a drop in capacity use from 85.0% to 82.7%. This was the most significant decrease since a drop of 3.7 percentage points in the third quarter of 2001.
Production fell in the electrical equipment and products manufacturing group, as the output of electric lighting equipment declined 21.2%. As a result, capacity use in this industry slid from 71.3% to 69.2%.
In the paper products manufacturing industry, capacity use decreased by 0.6 percentage point to 94.1%. However, this rate was still 3.5 points above the annual average of 90.6% for 2002. A decrease in production by pulp and paper and cardboard plants accounted for the reduced output in this group.
In the machinery manufacturing industry, the rate went from 78.2% to 77.6%. Varied production results from the components of this industry contributed to a 1.4% reduction in output for this industry.
For manufacturers of transportation equipment, the rate remained at 84.3%. The rise in production of automotive vehicles was not sufficient to offset cuts in the output of aerospace parts and products.
Industries in the manufacturing sector that supply the construction market benefited from soaring housing markets. Production increased in the manufacturing of plastic products for the housing market, clay, glass and glass products and cement and concrete products. Capacity use rose from 85.2% to 89.2% for manufacturers of plastic products. In the non-metallic mineral products manufacturing industry, the rate climbed by 3.1 percentage points to reach a peak of 92.9% in the third quarter.
Strong increase in mining in other sectors
Capacity use in the forestry and logging sector plunged from 88.4% to 77.8%, the result of a 12.8% decline in output. This was the biggest quarterly decline in capacity use for this sector since the first quarter of 1991, when the rate tumbled by 11.1 percentage points.
In the electrical power sector, capacity use slipped from 84.7% in the second quarter to 84.1% in the third, with electric power generation decreasing significantly in August because of the power outage that plunged Ontario into darkness.
Despite the upsurge in the construction sector, capacity use held steady at 85.6%. A 1.4% increase in production was offset by a gain in production capacity.
The strength of the diamond mining sector accounted for the 7.2% increase in output in the mining sector. As a result, capacity use for this sector rose by 5.9 points to 85.6%. This was the strongest increase since the fourth quarter of 1999 when the rate had increased by 6.7 percentage points. In the oil and gas extraction sector, the rate rose marginally from 63.0% to 63.1%.
Available on CANSIM: table 028-0002.
Definitions, data sources and methods: survey number 2821.
Data for the fouth quarter on industrial capacity utilization will be released on March 11, 2004.
For more information, or to enquire about the concepts, methods or data quality of this release, contact Mychèle Gagnon (613-951-0994) or Richard Landry (613-951-2579), Investment and Capital Stock Division.