MNI DATA ANALYSIS: Canada 1Q Capacity Util Rate Reaches 86.1%>

By Yali N'Diaye

     OTTAWA (MNI) - Canada industrial capacity utilization rate rose 0.5 

percentage points to 86.1% in the first quarter 2018, its highest level 

since the first quarter 2006, Statistics Canada reported Friday. 

     This was the seventh quarterly increase, the longest stretch since 

the third quarter 2009 through the first quarter of 2011. 

     The data confirmed the Bank of Canada's assessment that the economy 

is operating close to capacity, supporting the need to increase business 

investment. However, the latter continues to face headwinds stemming 

from uncertainty about U.S. trade policies. 

     Non-residential investment growth, including machinery and 

equipment, picked up to 2.6% in the first quarter from 1.9% the previous 

quarter, lifting the contribution to GDP 1.0 point from 0.7 points. 

     "Data on imports of machinery and equipment suggest continued 

recovery in investment," the BOC said in its May 30 policy statement. 

Capacity utilization data released Friday also support such view. 

     --CONSTRUCTION 

     Construction was a key contributor to the first quarter increase, 

as capacity utilization rose 1.6 points to 92.4% in the sector, the 

highest level since the third quarter 1990. 

     The agency cited widespread gains within the industry. 

     --MANUFACTURING 

     To a lesser extent, manufacturing also drove the overall capacity 

utilization rate higher, as it increased 0.4 points to 86.1%, the 

highest level since the fourth quarter 2000. 

     Transportation, in particular, was up 2.0 points to 85.6%. 

     Instead, perhaps feeling the pain from duties imposed on Canadian 

softwood lumber in January by the U.S., the capacity utilization rate 

declined 2.3 points to 91.7% for woods products. 

     --ABOVE LONG-TERM AVERAGE 

     Both the total and manufacturing capacity utilization rates widened 

the gap against their respective long-term averages. 

     The long-term average (since the first quarter 1987) of the 

industrial capacity utilization rate is 83.1%. 

     The long-term average for manufacturing is 81.2%. 

     Friday's figures are consistent with increasing pressure on prices 

as the economy runs near its potential. 

     In fact, "many of our exporters are already operating at full 

capacity," BOC Deputy Governor Sylvain Leduc said in a speech May 31. 

--MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com

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