Capacity Utilization Increases at Accelerating Rate for Third Month

Durable goods capacity utilization was 78.0% in January 2015. The month-over-month rate of change was 4.0%, which was the 12th straight month of month-over-month growth. Also, the month-over-month rate of growth has accelerated each of the last three months, was growing at its fastest rate since July, and was growing at its second fastest rate since July 2012. The annual rate accelerated to 2.4%, which was the fastest rate of annual growth since March 2013. This is more than double the annual rate of growth recorded from December 2013 to April 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 four 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. My forecast for durable goods capacity utilization has been off by about 4.5% in recent months. However, in the summer of 2014 the Federal Reserve revised early capacity utilization data higher to better match our index. I'm thinking this might happen again so that reported capacity utilization better matches the growth in our backlogs index.

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; automotive; custom processors; durable goods; food/beverage processing; forming/fabricating (non-auto); furniture; machinery/equipment; petrochemical processors; plastics/rubber products; primary metals; textiles/clothing/leather goods; wood/paper

Decelerating Growth: construction materials; printing

Accelerating Contraction: none

Decelerating Contraction: electronics/computers/telecommunications