Insights 
VT 
Canada’s industrial capacity utilization rate rose to 80.1% in the first quarter, surpassing the expected 79.8%. This indicates progress as monetary policy eases.
In the mining, quarrying, and oil and gas extraction sector, the capacity utilization rate increased by 0.7 percentage points to 76.7%. This growth was linked to heightened activity in the oil sands and support services.
Electricity Sector Insights
The electric power generation, transmission, and distribution sector saw its rate increase from 83.2% to 86.1%. The demand for electricity rose due to below-normal temperatures, leading to increased heating requirements.
Conversely, the manufacturing sector experienced a slight decrease of 0.2 percentage points, landing at 77.9%. Declines in petroleum and coal product manufacturing by 6.9 percentage points and fabricated metal product manufacturing by 3.1 percentage points were primarily responsible for this downturn.
What we’re seeing in this report is an economy showing patches of strength—in particular, those tied closely to energy production and utilities—while other areas struggle to keep pace amid shifting monetary conditions. The uptick in Canada’s industrial capacity utilisation rate to 80.1%—a touch above expectations—comes during a period when policy-makers are pulling back from aggressive tightening. That’s telling.
Bouchard’s department has linked the increased rate in oil and gas extraction to regained momentum in oil sands development and the uptick in activities that support such extraction. Essentially, production is responding to stronger demand, or at the very least, positioning for it. Meanwhile, the 2.9-point jump in electricity sector utilisation directly mirrors weather impacts—lower-than-average temperatures prompting higher residential and industrial draw, especially in regions still dependent on legacy heating.
Manufacturing Sector Challenges
Yet, despite these sector-specific lifts, the devil lies in manufacturing’s detail. A 0.2-point drop may not sound like much on its own, but once broken down—subtracting nearly 7 percentage points from petroleum and coal product output and more than 3 from fabricated metals—it begins to reflect something less cyclical and more structural. These drops don’t typically reverse overnight.
Traders focused on derivatives should pay extra attention to the divergence across industrial segments. The discrepancy hints at where volatility may continue to surface—and where future pricing assumptions may need adjustment. While parts of extraction and energy bounce back, manufacturing still sends a warning that output constraints remain unresolved.
We’ll be reviewing implied volatility in response to these data, especially ahead of inventory and output releases. The current pace won’t support a sustained rebound across all sectors, and the market is unlikely to treat this rise in capacity use as evenly weighted.
Moreover, expect forward-looking indicators tied to energy-sensitive instruments to reflect this short-term demand fluctuation. Heating anomalies—like those driving electricity needs last quarter—carry direct implications for seasonal hedges and calendar spreads. Further dislocation might surface where infrastructure fails to keep pace or where margins tighten under fluctuating input costs.
For now, the takeaway is relatively clear. While higher utilisation in extraction and power might imply a pick-up in core industry demand, it also heightens exposure to commodity shocks and input price swings. Lower run-rates in manufacturing, on the other hand, suggest we haven’t yet cleared the hurdle of broader industrial demand recovery.
For those watching short-term interest rate expectations—particularly in futures or options structure—the mixed data is less likely to dramatically alter the path, but may influence pricing at the margins. There’s little in this report to suggest a single directional move across rates—but clear enough signs that differentials between sector-linked exposures could widen.
