Canadian industries operated at 85.5% of their production capacity in the second quarter, up from 83.7% in the first quarter. This follows a slight decrease in capacity utilization in the first quarter of 2018 from the fourth quarter of 2017.
The increase in the second quarter of 2018 was led by the mining, quarrying and oil and gas extraction sector and, to a lesser extent, the manufacturing sector.
Increase in capacity utilization led by oil and gas extraction
The capacity utilization rate of the oil and gas extraction subsector increased for a fifth consecutive quarter, rising from 82.7% in the first quarter to 87.1% in the second quarter. The rate has risen 7.6 percentage points since the first quarter of 2017, due to lower oil transportation capacity combined with higher oil prices in the second quarter, resulting in increased production.
In the construction sector, capacity use rose 0.8 percentage points to 93.0% in the second quarter. Increased activity in residential and non-residential building construction led the gain.
Conversely, capacity utilization in mining—excluding oil and gas extraction—and quarrying fell 1.4 percentage points to 76.0%, following a flat first quarter. A slowdown in iron ore mining due to work interruptions constrained production during the quarter.
Durable goods lead capacity utilization in the manufacturing sector
The manufacturing capacity utilization rate rose 1.8 percentage points to 81.8% in the second quarter. Year over year, the rate was up 0.7 percentage points. Increased production in durable goods manufacturing industries drove the increase.
Capacity utilization rose in 16 of the 21 major manufacturing groups, accounting for approximately 80% of the manufacturing sector’s gross domestic product.
After falling 13.3 percentage points in the first quarter, the capacity utilization rate in the non-metallic mineral product manufacturing industry rebounded 19.3 percentage points to 76.2% in the second quarter. This represents a year-over-year change of 3.4 percentage points as demand and production for this industry are influenced by the seasons, decreasing in the winter and rising in the spring.
Among food manufacturers, the capacity utilization rate was up 2.8 percentage points to 85.2% in the second quarter, due to increased production of most foods. Year over year, the rate increased by 4.8 percentage points.
The capacity utilization rate of the primary metal manufacturing industry, which includes aluminum and steel, increased 2.1 percentage points to 80.6% in the second quarter. The rate was up 3.5 percentage points year over year, partly due to increased exports of steel and aluminum products, in anticipation of new customs tariffs on Canadian exports of steel and aluminum products to the United States.
The overall increase in the manufacturing sector was partially offset by decreases, mainly in the petroleum and coal product manufacturing industry. After edging down in the first quarter, the capacity utilization rate in the petroleum and coal product manufacturing industry fell 12.8 percentage points to 78.2% in the second quarter. Lower production caused by temporary shutdowns and maintenance work at several refineries, which began in April and continued into May, led to the downturn. Year over year, the rate fell 7.8 percentage points.
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Dean Popplewell
He has a deep understanding of market fundamentals and the impact of global events on capital markets.
He is respected among professional traders for his skilled analysis and career history as global head
of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean
has played an instrumental role in driving awareness of the forex market as an emerging asset class
for retail investors, as well as providing expert counsel to a number of internal teams on how to best
serve clients and industry stakeholders.
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