Canada's capacity rate hits 16-year low on exports

Fri Sep 12, 2008 1:55pm EDT
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By David Ljunggren

OTTAWA (Reuters) - Weak exports meant Canadian industries ran at just 78.9 percent of their capacity in the second quarter of this year, the lowest level in 16 years and further evidence the economy is struggling.

The drop from the 79.6 percent recorded in the first quarter was the fourth consecutive quarterly fall in capacity use, Statistics Canada said on Friday.

Market analysts had predicted a rate of 79.3 percent. The second-quarter rate was the lowest since the 78.6 percent recorded in the first three quarters of 1992 and reflects an economy struggling to deal with the U.S. slowdown.

Companies are also being hurt by the strong Canadian dollar and increased foreign competition.

"Keeping in line with the fact that this report is typically the most pessimistic measure of Canadian capacity pressures, this was a weak release," said Ian Pollick, an economics strategist at TD Economics.

"U.S. economic weakness and a strong Canadian dollar remain the two key detractors of this report."

The soft economy is a factor in the campaign leading up to Canada's October 14 general election. Conservative Prime Minister Stephen Harper says only his government can be trusted to cope with the effects of problems in the United States.

Statscan said the drop in the rate was less pronounced than in the two previous quarters.   Continued...