Economic News Blog
Posted by: Steven Kline, Jr. 16. September 2014

Durable Goods Capacity Utilization Remains Strong

According to the Federal Reserve, durable goods capacity utilization was 77.5% in August 2014. The month-over-month rate of change was 2.3%, which broke a string of six straight months of accelerating growth. The annual rate of change accelerated to 2.0% in August. This is double the annual rate of growth recorded in March 2014. This is the fastest rate of annual growth since April 2013.

Since June 2008, the Gardner Business Index backlog index has been a very good leading indicator of durable goods capacity utilization. Our backlog index is growing at its fastest rate since April 2011. The trend in the backlog index is pointing towards a rapid increase in durable goods capacity utilization. My forecast calls for durable goods capacity utilization to reach 80% in September and remain above that level through the end of 2015.

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: aerospaceautomotive; custom processorsdurable goodsforming/fabricating (non-auto); furnituremachinery/equipment; petrochemical processorsplastics/rubber productsprimary metalsprintingtextiles/clothing/leather goods

Decelerating Growth: construction materialswood/paper

Accelerating Contraction: electronics/computers/telecommunications

Decelerating Contraction: food/beverage processing

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