(December 7 – 12:15 ET) – Today’s report showing a dip in capacity utilization indicates a slowdown, but not enough to inspire the Bank of Canada to cut rates, says BMO Nesbitt Burns Inc.

Capacity utilization slipped slightly in the third quarter to 86.9% — after three years of gains. The new numbers indicate “a top is forming in utilization rates as the U.S. economy begins to roll over,” says BMO Nesbitt’s chief economists Dr. Sherry Cooper.

BMO had anticipated the decline in the wake of the reported slowdown in industrial production in the quarter. Although it notes that the overall manufacturing rate still increased slightly to a 25-year high of 87.5%.

Increased high-tech production pushed utilization rates in the electrical and electronic products sector to 103.4%, keeping production above the supposed maximum output level. The same condition was observed in the U.S. where semiconductor production moved above 100% of capacity.

“Given the Canadian economy’s expected out-performance in 2001 and in light of what are still high utilization rates, the Bank will likely resist matching any near-term Fed easing,” says BMO.
-IE Staff