Yes, there was a federal budget yesterday. And yes, coming up we have an interest rate decision by the U.S. Federal Reserve.
Enough with that stuff. Let's look at capacity utilization rates.
It may not be the most glam event of the week, but today's release of data by Statistics Canada is an important one.
Today we learned that Canadian industries cut their use of productive capacity for the fifth consecutive quarter to 79.4 per cent in the third quarter of 2001.
The rate dipped by 2.5 percentage points in the quarter, which is the largest-single quarter decline on record. The last time there a drop in this range was in the last quarter of 1990, in the depths of a Canadian recession.
It would be nice to say that the dip in capacity use has something to do with Sept. 11. It's hard to see that, given that the third quarter ends in September. It would also be nice to say that the decline was about one sector, say high-tech. And capacity use in tech did slide in the quarter. Thing is, companies in virtually every other sector in the industrial aggregate also cut back on production. That means forestry, logging, mining, electric power generation, construction, automotive, chemicals, and on and on. Pretty much everything got hit.
Which does bring us back to the federal budget.
Yesterday's budget was a modest affair designed for an economy facing modest times. Using the median estimate from surveyed private sector economists, the government is figuring on slow growth next year, somewhere in the order of 1.1 per cent. That's reasonable, maybe even cautious. It is certainly possible to construct a case where the Canadian economy recovers a little sooner and a little stronger than the assumptions suggest.
But today's data does not add to that case.
The downside risks to the Canadian economy are also easy to construct. The U.S. keeps shedding jobs, 331,000 of them in November. Canada lost 40,000-plus full-time jobs the same month. And companies, apparently, have pared down production even more than anybody thought.
The problems are maybe just a bit worse, a bit more structural than cyclical, than previously supposed.
Looks like we should start hoping for that rate cut from the Federal Reserve.
The bond markets figure it is coming. Watch for them to get hit if Alan Greenspan decides to skip it.
He probably won't forget. Savvy central banker that he is, Big Al knows that he is central banker to more than the U.S. of A. He's really central banker to the world.
And this part of the world, among many others, needs the U.S. to come back strong.
Stay tuned.