June 14, 2012 / 12:48 PM / 5 years ago

Canadian first quarter industrial capacity use rises

2 Min Read

OTTAWA (Reuters) - Canadian industries operated at 80.7 percent of their capacity in the first quarter, up from 80.5 percent in the final quarter of 2011 due to strength in the manufacturing sector, Statistics Canada said on Thursday.

The capacity utilization rate, the ratio of an industry's actual production to its potential production, was slightly higher than the 80.5 percent forecast in a Reuters poll.

But it has yet to return to its pre-recession peak of 83.4 percent even though the rate has steadily risen in 11 of the past 12 quarters.

Manufacturers saw their capacity use rise 0.7 percent in the quarter to 81.3 percent as strong demand for motor vehicles boosted the transportation equipment industry's rate to 89.5 percent from 87.3 percent. Machinery, wood products and fabricated metals also contributed to the manufacturing gains.

Non-manufacturing industries reported a decline in capacity use as weakness in forestry and logging, electrical utilities and mining offset gains in oil and gas and construction.

The Bank of Canada looks at the level of spare capacity in the economy to determine whether inflationary pressures are building and interest rate increases might be warranted.

In its April Monetary Policy Report, the bank estimated the overall economy was operating at half a percent below its production capacity in the first quarter and that it would reach full capacity in the first half of 2013.

Reporting by Louise Egan and Alex Paterson; Editing by James Dalgleish

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