Economic News Blog
Posted by: Steven Kline, Jr. 18. November 2014

Durable Goods Capacity Utilization Extends Growth Streak

According to the Federal Reserve, durable goods capacity utilization was 77.3% in October 2014. The month-over-month rate of change was 1.3%, which was the ninth straight month of month-over-month growth; however, the rate of growth has slowed each of the last three months. The annual rate of change dipped slightly to 1.8%. The annual rate of growth has been between 1.8% and 2.0% for four 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 two 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 for the remainder of 2014 and the early part of 2015. Although, once again recent data from the Federal Reserve seems to be diverging from what our backlog index indicates. 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: aerospacecustom processorsforming/fabricating (non-auto); furnituremachinery/equipment; petrochemical processorsplastics/rubber productstextiles/clothing/leather goods

Decelerating Growth: automotiveconstruction materialsdurable goodsprimary metalsprintingwood/paper

Accelerating Contraction: electronics/computers/telecommunicationsfood/beverage processing

Decelerating Contraction: none

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