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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