On Friday, the Federal Reserve reported that capacity utilization for U.S. industry in July rebounded slightly from the record low in June of 68.1%. The July reading was 68.5%. The The Fed’s capacity utilization calcuation is based on the percentage of total U.S. industrial capacity being utilized.
Capacity Utilization is considered a leading indicator of inflation and future capital spending. The July reading is an indicator that there is little inflationary pressure in the U.S. economy (at least now - I’m concerned about the effects of U.S. deficit spending on long-term inflation). The near record amount of spare capacity also indicates that industry has little need to spend capital to increase production (even if demand picks up significantly). What is still not obvious is if the slide in capacity utilization has ended.
Data source:
U.S. Federal Reserve
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This week the Federal Reserve reported that capacity utilization for U.S. industry hit another record low of 68% in June. The Fed’s capacity untilization calcuation is based on the percentage of total U.S. industrial capacity being utilized. This report means that there is more excess industrial capacity (as a percentage of the total) in the U.S. than at anytime on record.
Capacity Utilization is considered a leading indicator of inflation and future capital spending. This record low reading is an indicator that there is little inflationary pressure in the U.S. economy (at least now - I’m concerned about the effects of U.S. deficit spending on long-term inflation). This record amount of spare capacity also indicates that industry has little need to spend capital to increase production (even if demand picks up significantly).
Data source:
U.S. Federal Reserve
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Yesterday, the Federal Reserve reported that capacity utilization for U.S. industry hit a record low of 68.3% in May. The April 2009 number was also revised down from 69.1% to 69%. The Fed’s capacity untilization calcuation is based on the percentage of total U.S. industrial capacity being utilized. This report means that there is more excess industrial capacity in the U.S. than at anytime on record. This doesn’t look like a recovery to me.
Capacity Utilization is considered a leading indicator of inflation and future capital spending. This record low reading is an indicator that there is little inflationary pressure in the U.S. economy (at least now - I’m concerned about the effects of U.S. deficit spending on long-term inflation). This record amount of spare capacity also indicates that industry has little need to spend capital to increase production (even if demand picks up significantly).
Data source:
U.S. Federal Reserve
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On Friday, the Federal Reserve reported that capacity utilization for U.S. industry hit a record low of 69.1% in April. The Fed’s calcuation is based on the percentage of total industrial capacity being utilized. This report means that there is more excess industrial capacity in the U.S. than at anytime on record.
Capacity Utilization is considered a leading indicator of inflation and future capital spending. This record low reading is an indicator that there is little inflationary pressure in the U.S. economy (at least now - I’m concerned about the effects of U.S. deficit spending on long-term inflation). This record amount of spare capacity also indicates that industry has little need to spend capital to increase production (even if demand picks up significantly).
Data Source:
U.S. Federal Reserve
The above chart shows industrial production (factory output) over the past three years for communications equipment and semiconductors. Production of communications equipment continued to hold up well throughout March (however a slight negative pattern has developed the last couple of months).
On a different note, industrial output for semiconductors continues to be in a very bad pattern. Since my last post on this topic the numbers for prior months were also revised downward. Why is this important? Because semiconductors are widely considered a leading indicator of economic activity.
Data Source:
> U.S. Federal Reserve. G.17 Industrial Production and Capacity Utilization.
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Yesterday’s report from the Federal Reserve showed that capacity utilization for U.S. industry hit a record low of 69.3% in March. The Fed’s calculation is based on the percentage of total industrial capacity being utilized. This report is significant because it means there is more excess industrail capacity in the U.S. than at anytime on record. In March U.S. industry was producing at just over 2/3 of it total potential.
Capacity utilization is considered a leading indicator of inflation and future capital spending. So, this record low reading is an indicator that there is little inflationary pressure in the U.S. economy (at least now - I’m still concerned about the effects of U.S. deficit spending on long-term inflation). It also indicates that industry has little need to spend capital to increase production (even if demand picks up).
Data source:
U.S. Federal Reserve
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The above chart shows industrial production (factory output) over the past three years for communications equipment and semiconductors. The point of the chart is to show how these two sectors have held up during the current recession.
Communications equipment is interesting because it has held up very well throughout the current economic crisis (at least so far). This supports much of what I have been hearing from close friends in the communications industry. My good friend Dan C. who is the CEO of a large communications services company (and writes the Bear on Business website) has been telling me for months that demand for communications services is good. I’ll keep an eye on this in coming months to see if the trend continues. The chart does show communications equipment production turned slightly negative in February. However, we need to see another month or two of data before we can tell if a pattern is developing.
On a different note, industrial output for semiconductors and related components is in a bad pattern. Why is this important? Because semiconductors are widely considered a leading indicator of economic activity. This indicator is still negative for now.
Data Source:
> U.S. Federal Reserve. G.17 Industrial Production and Capacity Utilization. Various monthly reports.
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The first chart provides a view of U.S. industrial production (the total output of U.S. factories and mines) over the past three decades. This chart puts the current downturn in industrial production into historical perspective. The second chart shows U.S. industrial production has had no growth over the past 10 years (talk about “lost decade”). Essentially, the output of U.S. factories and mines was no larger in February 2009 than it was 10 years ago.
The negative trend in these charts also represents the deflationary pressures that are currently present in the U.S. economy. This trend is what the Federal Reserve (Fed) is trying to fight with its loose monetary policy. The Fed has clearly decided that reversing this trend (in the near term) is more important than the risk of inflation.
Tomorrow’s post will chart industrial production for communications equipment and semiconductors. Semiconductor output is particularly important because it is often used as a leading indicator for economic activity. Check in tomorrow to see what it is telling us.
Data Source:
> U.S. Federal Reserve. G.17 Industrial Production and Capacity Utilization. March 2009 release, and The 2008 Historical and Annual Revision.
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Capacity utilization is considered a leading indicator of inflation and future capital spending. Capacity utilization shows the level at which U.S. industry is running relative to its potential. As the chart in the previous post shows, a reading of 70.9% indicates that U.S. industry is running nowhere near its potential. The chart also shows that U.S. industry is running at a record low level relative to its capacity. Why is this important? It is important because with so much spare industrial capacity it can be argued that there is little inflationary pressure (at least for now - all the money printing may change this in the long term). It also means that industry has little need to spend capital to increase production (which can slow the economy even more).
This is the first chart in a three part series on U.S. industrial production and capacity utilization. This week the Federal Reserve released its data on industrial production and capacity utilization for February 2009. The numbers show that industrial capacity utilization in the U.S. matched its record low set in December 1982 of 70.9% (see above chart). This calculation is based on the percentage of total industrial capacity being utilized. Capacity utilization for U.S. industry is currently running well below its long-term average of 80.5%.
More on industrial production in tomorrow’s post.
Data source:
> Federal Reserve, G.17 Industrial Production and Capacity Utilization. March 2009 release, and The 2008 Historical and Annual Revision.
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