OTTAWA—Statistics Canada  (StatsCan) says the economy operated at 80.5 per cent of its production capacity in the fourth quarter, up half a point from the third quarter.

The capacity utilization rate is one of the key measures used by the Bank of Canada when it sets its interest rates.

If the rate is too high, the central bank gets concerned about inflation.

With the exception of the second quarter of 2011, Canadas capacity utilization rate has risen steadily since the second quarter of 2009 near the end of the recession.

However, the rate of 80.5 per cent in the fourth quarter of 2011 was below that of 83.4 per cent recorded in the first quarter of 2007 before the recession.

The manufacturing industry operated at 80.4 per cent of capacity in the fourth quarter, up 1.4 percentage points from 79 per cent in the previous quarter.

That was partially offset by a slight decline in the non-manufacturing sector.

The capacity utilization rate rose in 12 of the 21 major manufacturing industries, declined in seven and remained relatively stable in two.

Increases in the transportation equipment, machinery, chemical products, plastic products and metal products industries contributed the most to the quarters growth.

Capacity use declined in the paper manufacturing industry and, to a lesser extent, in the food, printing and related support activities and petroleum and coal products industries.