By Akhil Shah

OTTAWA (MNI) – Canadian industries decreased their production
capacity in the second quarter, operating at 78.4% compared to 78.9% in
the first quarter, Statistics Canada reported Wednesday.

The decrease was the first one after seven quarters of consecutive
gains. Manufacturing industries, particularly transportation equipment,
led the drop in the second quarter as motor vehicles and parts
manufacturing declined because of supply chain disruptions following the
March natural disaster in Japan. Of the 21 major manufacturing
industries, 15 recorded a decrease in capacity usage in the second
quarter.

During the second quarter, manufacturing capacity usage declined to
78.8% from 79.6% in the first quarter. Despite this decrease, capacity
usage in the second quarter remained higher than any rates recorded in
2008, 2009 and 2010, the agency reported.

Transportation equipment industry contributed the most to the
decline, falling 4.5 percentage points to 79.6% in the second quarter.
This followed a 4.1 percentage point increase in the quarter prior.
However, the rate was still much higher than the annual rates of 2008
and 2009, and remained above the 2010 annual level, Statistics Canada
said. A decrease in sales was cushioned by increasing inventory levels,
hence restricting the decline in the use of productive capacity for this
sector.

Other downward pressures to the manufacturing sector came from
manufacturers of beverage and tobacco products (-4.9 percentage points),
chemicals (-1.2 percentage points) and non-metallic mineral products
(-1.7 percentage points).

Manufacturers of beverage and tobacco products operated at 67% of
their capacity as production at distilleries and output at breweries and
soft drink and ice manufacturers declined in the second quarter.
Capacity usage in the chemical industry fell to 75.9% from 77.1% on
lower production of pharmaceuticals and medicine along with a decrease
in production of basic chemicals.

Upward contribution to the manufacturing sector came from machinery
manufacturers as they increased capacity usage by 3 percentage points,
operating at 86% in the second quarter. Higher production of mining and
oil and gas machinery and other general purpose machinery led the
increase.

Non-manufacturing sectors had a mixed performance with capacity
usage falling 7.1 percentage points (to 89.3%) in the forestry and
logging sector as production dropped sharply in the second quarter
despite an increase in constant-dollar exports of forestry products.

Capacity usage in the oil and gas extraction industry fell to 83.1%
from 85.3% as crude petroleum and natural gas production decreased in
the second quarter. Crude petroleum production was disrupted by Alberta
wildfires and maintenance shutdowns of refineries.

Mining industries capacity usage increased 1 percentage point (to
72%) in the second quarter, reaching 72%, while the construction
industry recorded a 0.7 percentage point (to 76.8%) increase in their
capacity use.

–Akhil Shah is a reporter with Need To Know News In Ottawa

** Market News International Ottawa **

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