Canadian industrial capacity utilization hits lowest rate since 1987

Canadian industrial capacity utilization hits lowest rate since 1987

According to Statistics Canada, Canadian industries operated at 70.3 percent of their production capacity in the second quarter, down from 79.8 percent in the previous quarter. This was the lowest rate since the first quarter of 1987, when the industrial capacity utilization rates, in their present form, were first published. This dip was due to a slowdown in most sectors following the physical distancing measures imposed in mid-March to stop the spread of COVID-19.

With the gradual resumption of economic activities following easing of the physical distancing measures implemented in the spring, an upward trend in the industrial capacity utilization rate should be observed in most industries in the third quarter.

The manufacturing sector was the main driver of this decrease. According to the results of the Monthly Survey of Manufacturing, many manufacturers reported that their activities were affected by the COVID-19 pandemic. In addition to disruptions in the supply chain, most industries were forced to slow production or close plants because of the physical distancing measures imposed by the different levels of government. In particular, non-essential businesses closed and they began to gradually reopen only midway through the quarter.

Capacity utilization in the construction sector fell sharply, down 10.6 percentage points to 80.2 percent in the second quarter. This was the largest quarterly decrease observed since the beginning of the time series in 1987. A general decline in activities across all industry subsectors was responsible for the drop.

Capacity utilization in mining and quarrying (excluding oil and gas extraction) fell 14.5 percentage points to 56.3 percent in the second quarter. This was the lowest level observed since the third quarter of 2009. Decreased activity was observed in all industry subsectors, especially support activities for mining, oil and gas extraction; and metal ore mining.

Year-over-year, the capacity utilization rate of manufacturing decreased 17.1 percentage points to 63.3 percent in the second quarter, the lowest rate since the beginning of the time series in 1987. Capacity utilization fell year over year in the 21 major manufacturing industries, with durable goods manufacturers, particularly transportation equipment makers, leading the overall drop.

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