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Excess capacity drops Canada's productivity

Published by Steve Coleman on December 13, 2011

A new long-term look at Canadian manufacturing says industry has become less productive.

Without looking at dollar values, Statistics Canada says the start of the new millennium hasn't been kind to Canadian manufacturing.

More capacity on production lines and company restructuring helped drag down Canadian productivity, the government agency says.

Between 2000 and 2010, the average annual growth rate slowed to 0.9 per cent. Between 1990 and 2000, productivity in the manufacturing sector increased an average of 3.6 per cent per year.

The extra capacity on shop floors developed in the decade after the year 2000 in 16 of the 20 manufacturing industries the government tracks.

Pulp and paper makers were among those hit as newspapers started losing ground to the Internet. High-tech firms also lost ground and gained space after the dot-com bubble burst.

Some of the excess capacity that appeared following 2000 was a reflection on a general slowdown in the North American economy, while developing nations started making their runs for dominance. The fact countries like China and India could do things cheaper had a definite impact on non-durable goods such as textiles, leather and clothing.

A surging Canadian dollar also took a big chunk out of the export business and lead to most of the post-2000 declines in labour productivity, Stats Can says.

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