Durable Goods Capacity Utilization Unchanged from One Year Ago

According to the Federal Reserve, durable goods capacity utilization was 76.6% in February 2014. The rate of capacity utilization is unchanged from one year ago. The annual rate of change was 1.1%, which is the slowest rate of growth since July 2010.

The backlog index from our metalworking business index looks to be an excellent leading indicator for durable goods capacity utilization. The rate of change in capacity utilization is following the rate of change in the metalworking backlog index nearly tick for tick. It appears that our backlog index leads durable goods capacity utilization by six months or so average. Our backlog index grew in February for the first time since June 2011. And, based on the early results from our March survey, it should grow again this month. 

In order for the annual rate of change in durable goods capacity to roughly reflect the current trend in the annual rate of change of our backlog index, actual capacity utilization would need to reach 81% by the end of 2014. If this happens, capacity utilization would be reach its highest level March 1998. And, it would signal very strong spending on capital equipment.

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: custom processors; furniture; plastics and rubber; primary metals; printing

Decelerating Growth: automotive; construction materials; durable goods; forming and fabricating (non-auto); textiles, clothing and leather goods; wood and paper

Accelerating Contraction: aerospace; electronics, computers, and telecommunications; food and beverage processing; petrochemical processors

Decelerating Contraction: machinery and equipment