Production boom won’t quit

OTTAWA, Ont. – Propelled by strong foreign demand, Canadian industry is churning out goods at an almost record pace.

In the third quarter, producers were at 86 per cent production capacity – their highest operating rate since the 1987-88 economic expansion, according to Statistics Canada.

The rates have risen in each of the past four quarters, but the 1.8 per cent jump in the latest quarter was equal to the total increase of the three previous quarters combined. The current level is less than one percentage point below the 1987-88 peak of 86.8 per cent.

“The rate of capacity use is approaching the peak of the late 1980’s because the growth of production capacity over the past year has not kept pace with the strong growth in output,” Statistics Canada explains. However, the latest Survey of Private and Public Investment, released in July, reported that spending on plants and equipment in 1999 will likely regain record levels.

Without investment in new equipment, a number of industries are approaching production limits. Seven of the 22 industry groups in manufacturing that Statistics Canada keeps tabs on are operating at over 90 per cent capacity.

“Traditionally, high rates of capacity use have signaled that inflationary pressures might be building in the economy. Although there have been some upward movements in prices recently, which were mostly due to rising energy prices, inflation still appears to be in abeyance,” Statistics Canada reports.

In October, the year-over-year change in the Consumer Price Index, excluding the food and energy components, was +1.6 per cent – well within the Bank of Canada’s inflation target range of one to three per cent. n