Capacity Utilization Drops for 4th Time in 5 Months

Durable goods capacity utilization was 76.2 percent in October 2015. The one-month rate of change, which was -0.6 percent in October, contracted for the fourth time in five months. October had the fastest rate of contraction in those four months. The annual rate of change continued to grow, but the rate of growth decelerated for the seventh consecutive month. The annual rate of growth was its slowest since July 2014.  

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 an accelerating rate in October for the sixth month in a row. The trend in the backlog index shows that capacity utilization will likely be contracting by the end of the year and well into 2016.

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: automotive; food/beverage processing; petrochemical processors

Decelerating Growth: aerospace; construction materials; custom processors; durable goods; forming/fabricating (non-auto); furniture; machinery/equipment; plastics/rubber products; printing; textiles/clothing/leather goods; wood/paper

Accelerating Contraction: electronics/computers/telecommunications; primary metals

Decelerating Contraction: none