Research
3/19/2020 | 1 MINUTE READ

Capacity Utilization Contracting at a Slower Rate

In February, durable goods capacity utilization was 74.7%, which was the second lowest rate of capacity utilization since September 2017. Compared with one year ago, capacity utilization contracted 2.0%. This was the ninth month in a row and the 10th of the last 11 months that capacity utilization contracted. However, the the month-over-month rate of contraction has decelerated since the peak rate of contraction in October 2019.

The annual change in durable goods capacity utilization contracted at an accelerating rate for the fourth month in a row, falling to -1.4% from -1.2%. February was the fastest rate of annual contraction since March 2017. As the annual rate of change tends to lead capital equipment consumption by seven-to-10 months, capacity utilization is signaling accelerating contraction in capital equipment spending through at least the first half of 2020.

The GBI: Metalworking backlog index tends to lead the annual rate of change in capacity utilization by seven-to-10 months. The annual rate of contraction in the Backlog index decelerated for the second month in a row. The Backlog index is indicating that the rate of contraction in durable goods capacity utilization should bottom out around June.

Accelerating Growth: 

Decelerating Growth: electronics/computers

Accelerating Contraction: aerospace, custom processors, durable goods, forming/fabricating (non-auto), machinery/equipment, petrochemical processors, plastics/rubber products, primary metals

Decelerating Contraction: automotive, construction materials, food/beverage processing, furniture, printing, textiles/clothing/leather goods, wood/paper products

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