MNI DATA ANALYSIS: Canada 2Q Capacity Util Rate Rises To 85.5%>

By Yali N'Diaye

     OTTAWA (MNI) - Canadian industries operated at 85.5% of their 

production capacity in the second quarter, up from 83.7% in the first 

quarter, Statistics Canada reported Wednesday. 

     Gains were widespread, led by oil and gas extraction and 

manufacturing. 

     Some changes in the methodology explained sharp revisions to the 

previous quarters through the beginning of 2017. The agency indeed 

incorporated capacity utilization data from the monthly manufacturing 

survey through the first quarter of 2017, making comparisons difficult. 

     As a result of such changes, the first quarter estimate was revised 

to 83.7% from 86.1%. 

     With this caveat in mind, the second quarter capacity utilization 

rate of 85.5% is the highest since the first quarter 2007. 

     The long-term average is 83.0%, with or without data points between 

the first quarter 2017 and the second quarter 2018. 

     --MANUFACTURING HIGHER 

     In the manufacturing sector, the capacity utilization rate rose 1.8 

percentage points to 81.8%. 

     The first quarter estimate was revised down to 80.0% from 86.1%. 

     The long-term average is 81.0%, and without the data between the 

first quarter 2017 and the second quarter 2018, it is 81.1%. 

     Looking at long-term averages and current capacity utilization 

rates, Wednesday's report supports the Bank of Canada's view that the 

Canadian economy is operating at its potential, which should support 

business investment ahead. 

     In the manufacturing sector, 16 of 21 industries recorded higher 

capacity utilization rates, led by durable manufacturing. 

     In particular, the capacity utilization rate increased 2.1 

percentage points to 80.6% in primary metal manufacturing. Higher 

exports of steel and aluminum increased in anticipation of U.S. tariffs 

in effect since the beginning of June. 

     --OIL AND GAS CONTRIBUTION 

     Oil and gas extraction explained a large part of the total 

increase, with a capacity utilization rate at 87.1%, up from 82.7% in 

the first quarter, when transportation issues had constrained capacity. 

As those improved in the second quarter and oil prices increased, 

production also rose. 

     The construction sector also operated at a higher rate of 93.0%, 

owing to stronger activity in both residential and non-residential 

building construction. 

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

[TOPICS: MACDS$,M$C$$$]