Canada's economic slack falls

The amount of slack in the Canadian economy in the first three months of 2012 reached its lowest since the end of 2007, prior to the economic recession, Statistics Canada reported Thursday.

StatsCan says industrial capacity utilization ratesthe ratio of an industry's actual output to its estimated potential outputedged up 0.2 percentage points from the previous quarter. Canadian industries operated at 80.7 per cent.

The closer the ratio is to 100, the less slack there is in the economy. So the rate is a broadreading ofhow efficient the economy is at any given time.

Capacity use in the manufacturing sector rose for the third straight quarter, risingby 0.7 percentage points to 81.3 per cent.

The oil and gas industry ran at 90.2 per cent, an increase of 0.6 percentage points.

Oil prices during the period hovered around $100 US a barrel. Crude prices have since fallen to about $83 today.

As the amount of capacity wiggle room falls, prices for machinery and labour rise.

Oilsands' break-even costs could rise

"That puts upward pressure on the break-even point for many (oilsands) projects," Todd Hirsch, senior economist with Edmonton-based ATB Financial said in a commentary, "just as oil prices are starting to slide."

The capacity utilization rate was up in 13 of the 21 major manufacturing industries in the first quarter.

The largest contributors to the increase in the capacity utilization rate were the transportation equipment, machinery, wood product manufacturing and fabricated metal products industries.

Capacity use declined in some industries, particularly the computer and electronic product manufacturing industry and, to a lesser extent, the primary metals, food and paper industries.

Demand for motor vehicles and motor vehicle parts raised the capacity utilization rate in the transportation equipment industry by 2.2 percentage points to 89.5 per cent.