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

Durable Goods Capacity Utilization Highest Since April 2008

According to the Federal Reserve, durable goods capacity utilization was 77.3% in June 2014. This is the highest rate of capacity utilization since April 2008. This is the fifth month in a row of accelerating growth in the monthly rate of change. Capacity utilization was 2.2% higher in June 2014 than it was in June 2013. This is the fastest rate of month-over-month growth since October 2013. The annual rate of growth accelerated to 1.4%, which is the third month in a row that the annual rate of change has grown at an accelerating rate. This is the fastest rate of annual growth since June 2013.

Most of the capacity utilization numbers for 2014 were revised upward. This does not surprise since the Gardner Business Index backlog index, which is an excellent leading indicator of capacity utililzation, has been pointing toward accelerating growth in capacity utilization for some time. Our backlog index leads durable goods capacity utilization by seven months on average. The annual rate of change of our backlog index has improved since May 2013. It has grown at an accelerating rate each of the last five months. Backlogs are growing at their fastest annual rate since march 2011. This strong upward trend is pointing to a significant increase in durable goods capacity utilization, which further indicates an increase in capital spending.

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: automotivedurable goodsmachinery/equipment; petrochemical processorsprimary metalsprintingtextiles/clothing/leather goods

Decelerating Growth: aerospaceconstruction materialscustom processorsfurniture manufacturingplastic/rubber productswood/paper

Accelerating Contraction: electronics/computers/telecommunications

Decelerating Contraction: food/beverage processingforming/fabricating (non-auto)machinery/equipment

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