Capacity Utilization and Productivity Analysis in the Canadian Food Manufacturing Industry

Food processing is Canada’s largest manufacturing employer, accounting for 236,000 jobs and the second largest manufacturing industry overall by revenue. However, the industry has recently experienced a considerable number of plant restructurings and a diminishing national trade surplus in processed food. The purpose of this study is to measure capacity utilization and multifactor productivity in order to examine the contribution of capacity utilization to change in productivity in the Canadian food manufacturing industry. I use data envelopment analysis and the Malmquist productivity index to measure capacity utilization and multifactor productivity in food manufacturing industry over the period 1990-2012 at provincial level. The results show every province (except Newfoundland) experienced a slowdown in multifactor productivity growth since 2000, the extent of which varies considerably by province. Capacity under-utilization is one important reason for Atlantic and Prairie Provinces’ productivity growth slowdown.