Capacity Utilization Contracts for 6th Month

(Negative) Durable goods capacity utilization was 75.8 percent in August 2016. The one-month rate of change, which was -1.0 percent in August, contracted for the sixth month in a row and 13 of the last 15 months. The annual rate of change contracted for the eighth straight month as the rate of change contraction accelerated to its fastest rate this downturn.   

Since June 2008, the Gardner Business Index backlog index has been a very good leading indicator of durable goods capacity utilization. The annual rate of change for our backlog index contracted at a decelerating rate for the seventh month in a row. The backlog index tends to lead capacity utilization by seven to 10 months. Therefore, the trend in the backlog index shows that the rate of change in capacity utilization should bottom out any month now.

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: textiles/clothing/leather goods

Decelerating Growth: automotive; furniture; printing  

Accelerating Contraction: aerospace; construction materials; custom processors; durable goods; electronics/computers/telecommunications; food/beverage processing; forming/fabricating (non-auto); machinery/equipment; petrochemical processors; plastics/rubber products;  

Decelerating Contraction: primary metals; wood/paper