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OTTAWA-Significant cutbacks in production across many sectors dropped Canada’s overall industrial utilization rate to 74.7% for Q4, according to data released in March by Canada’s national statistical agency. The figure is the lowest since Statistics Canada began compiling such information in 1987.

The agency acknowledges weak utilization rates are to be expected, given the depth of the economic downturn, but it worries that a continued falloff will make it significantly more difficult for construction activity to gear up again once the bottom of the current cycle is reached. In the words of the report accompanying the data, “A figure between 80% and 85% of capacity is when firms in an industry start to think seriously about expanding facilities. For an awful lot of industries, particularly in the manufacturing sector, 80% to 85% of capacity is an increasingly far-away lofty goal.”

The report finds weakness in all sectors, with mining utilization at 69.8%, oil and gas utilization at 76.9% and forestry and logging at 73.5%. But it says the manufacturing utilization rate of 73.8% comes as the worst news because of its negative impact on export sales and employment. According to the agency, the weakest manufacturing sector is transportation equipment, which operated at only 58.1% of capacity Q4. It points out that the auto assembly and parts category makes up two-thirds of this sector. With North American vehicle sales down by one-quarter from a year earlier, it says major industry players are “barely hanging on to fight another day.” The problems in assembly operations are also showing up in the rubber and plastics categories, with utilization rates, respectively, of 75.9% and 67.9%.

If there’s a bright note, the agency adds, it’s the high-tech sector, which has not been as severely hurt as it was during the dot-com collapse. The data show computer and electronic product manufacturers were operating at 85.9% of capacity in the quarter. Metal production also did comparatively well, with a capacity utilization rate of 85.4%. However, the latter measurement was taken before the rapid deterioration in steel markets that occurred early this year, culminating in temporary mill closures in Hamilton and on the shores of Lake Erie.

Though the agency says the utilization-rate reductions are spread across the country, the gaps in the manufacturing sector are most heavily weighted in Ontario and Quebec.

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