The global recession has forced Canadian companies to reduce their amount of production, says Statistics Canada. The rate is a record low, falling below 70 per cent.

The agency reported that Canada's production capacity idled in the early months of 2009.

The rate of capacity utilization -- the level of how much industry produces in comparison to how much it could potentially produce -- dropped 5.6 percentage points in the first three months of this year bringing the total to 69.3 per cent.

That means Canadian companies are using just two-thirds of their tools to produce, while one-third of their capacity sits idle.

The 5.6 point drop represents the first time since Statistics Canada began recording the data in 1987 that the number has fallen below 70 per cent.

Economists say that the reduction means slack is building up in the Canadian economy at an unprecedented rate.

Economists with the Bank of Nova Scotia have pointed out that the decline is likely the lowest number since 1962, when the Bank of Canada began the series until Statistics Canada took over.

"Capacity utilization has hit bottom or is very close to doing so," wrote Scotia Capital economists in a note to clients, but added production should pick up very soon.

"When auto-sector shut-downs reverse in (the second half of the year), look for capacity utilization to increase to at least the low-70s in a virtual heart beat."

The record low number arrived when Canada's economy contracted by 5.8 per cent in the first quarter, the biggest retreat since 1991.

Statistics Canada said 18 of 21 major industries are registering declines in production capacity.

  • Manufacturing dropped by 7.8 points to 65.9 per cent.
  • Construction sector declined by 3.5 points to 71.8 per cent.
  • Mining fell by 55.3 per cent from 70.1 per cent.

Mining took a hit from big declines in the output of potash, copper, nickel and iron ore, the agency said.

The auto sector's capacity fell to just 42.5 per cent in the first quarter, compared to 58.3 per cent in the fourth quarter. That means less than half of Canada's factory space producing transportation equipment is actually in use.

The oil and gas extraction sector avoided the downturn trend and actually rose 1.7 points to 78.6 per cent.

With files from the Canadian Press