Capacity Utilization Grows for Fourth Month

(Positive) Durable goods capacity utilization was 74.6 percent in March 2017. The one-month rate of growth was 0.3 percent, which was fourth straight month of growth. The was the first run of growth in capacity utilization since late 2014 and early 2015. The annual rate of change contracted for the 18th straight month, but the rate of contraction decelerated for the sixth consecutive month.   

Since June 2008, the GBI: Metalworking backlog index has been a very good leading indicator of durable goods capacity utilization. The 1/12 rate of change for the backlog index has grown at a strong rate for nine months in a row. In March, the annual rate of change grew for the fourth 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 has bottomed and should start growing soon.

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: wood/paper

Decelerating Growth: automotive, construction materials, printing

Accelerating Contraction: custom processors, furniture, petrochemical processors, plastic/rubber products, textiles/clothing/leather goods

Decelerating Contraction: aerospace, durable goods, electronics/computers/telecommunications, food/beverage, forming/fabricating (non-auto), machinery/equipment, primary metals