Capacity Utilization Highest since March 2008
According to the Federal Reserve, durable goods capacity utilization was 78.4% in November 2014. The month-over-month rate of change was 2.4%, which was the 10th straight month of month-over-month growth. This was the first time the month-over-month rate of growth accelerated since June. The annual rate of change was unchanged at 1.9%. The annual rate of growth has been between 1.8% and 2.0% for five months. This is virtually double the annual rate of growth recorded in February and March 2014.
Since June 2008, the Gardner Business Index backlog index has been a very good leading indicator of durable goods capacity utilization. Our backlog index has grown at a slower rate the last three months, but the rate of growth is still quite strong. The trend in the backlog index is pointing towards a rapid increase in durable goods capacity utilization through the early part of 2015. Once again recent data from the Federal Reserve generally was revised higher to come into better alignment with our backlog index. My forecast calls for durable goods capacity utilization to reach 80% in December and remain above that level through July 2015. Currently, this forecast seems a little too optimistic.
We use capacity utilization as a leading indicator for a number of industries, although it is not tracked for as many industries as industrial production. You can see the trends in capacity utilization for a number of industries below.
Accelerating Growth: aerospace; custom processors; food/beverage processing; furniture; machinery/equipment; petrochemical processors; plastics/rubber products; primary metals; textiles/clothing/leather goods
Accelerating Contraction: electronics/computers/telecommunications
Decelerating Contraction: none
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