Economic News Blog
Posted by: Steven Kline, Jr. 16. May 2019

Month-Over-Month Capacity Utilization Contracts

 In April, durable goods capacity utilization was 75.3%, which was the first month that capacity utilization was below 76% since July 2018. Compared with one year ago, capacity utilization decreased 0.9%, which was the first month of contraction since December 2016. Also, the previous five months of capacity utilization were revised lower.

Annual growth in durable-goods capacity utilization decelerated to 2.2%. That was the third-straight month of decelerating growth and the slowest rate of annual growth since July 2018. As this annual rate of growth tends to lead capital equipment consumption by seven to 10 months, it is signaling that capital equipment consumption will peak later this fall. However, machine tool orders appeared to have already peaked.

The GBI: Metalworking backlog index – an excellent leading indicator of capacity utilization in durable goods – indicated a peak in capacity utilization had hit at the end of last year as the annual rate of growth in backlogs peaked in October 2017. The backlog index tends to lead the annual rate of growth in capacity utilization by seven-to-10 months. Note in the chart that the last two times the growth rate in backlogs decelerated and crossed under the rate of growth in capacity utilization, the rate of growth in capacity utilization peaked in the next couple of months.

Accelerating Growth: aerospace

Decelerating Growth: automotive, durable goods, electronics/computers/telecommunications, forming/fabricating, machinery/equipment, petrochemical processors, primary metals, textiles/clothing/leather goods

Accelerating Contraction: construction materials, custom processors, food/beverage processing, furniture, plastics/rubber product, printing, wood/paper products 

Decelerating Contraction: 

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