CAPACITY UTILIZATION FLAT AFTER 15 MONTHS OF GAINS
Courtesy of The Pragmatic Capitalist
This morning’s industrial production data came in weaker than expected and a look under the hood can tell us quite a bit about the current environment. Industrial production declined -0.2% vs estimates for a 0.2% rise. Capacity utilization failed to rise for the first time in 15 months. The reversing trend in industrial production has been apparent in recent months:
Capacity utilization is essentially measuring the amount of productive capacity the country is putting to use. A reading above 80 generally represents a growing, healthy expansion. It means we are utilizing the vast majority of our productive capacity. This is also a fairly good read on
Capacity utilization generally snaps back aggressively following a recession, however, the recent data shows a leveling off near past recessionary levels. July, August and September all showed flat growth in utilization – a pretty solid indication of the stagnant US economy.