Industries operated at 81.3 percent of capacity in the third quarter, rising sharply from 79.9 percent in the previous quarter as automakers rebounded from supply disruptions resulting from Japan's earthquake and tsunami.
The performance was above the 79.5 percent market forecast. It was also the highest rate since the third quarter of 2007 but still below the 83.4 percent peak seen earlier that year.
Canada's economy has fully recovered from a mild recession in 2008-09 but its manufacturing sector is less steady, hit by a strong Canadian dollar, weak US demand and more recently the Japan supply-chain disruptions.
Manufacturers' capacity use rose to 81.1 percent from 79.5 percent in the third quarter and gains were widespread across 13 of 21 industries.
Companies that make transportation equipment such as cars, ships and railroads were "by far" the largest contributors to higher output with an increase of 7.1 percentage points, Statscan said.
However, auto production had been hard hit in the second quarter by the supply chain disruptions, and the big third-quarter jump was simply a rebound that returned output to first-quarter levels, Statscan said.
Manufacturers of machinery, chemical products, beverages, metal products and paper also increased their output significantly in the third quarter.
Manufacturing sales data for October, released on Wednesday, however, suggested a slowdown in the sector in the fourth quarter.