Capacity utilization — a slight down trend

One economic data point I keep my eye on is capacity utilization (released monthly, compiled by the Federal Reserve). I’ve written about this in the past (see here, here and here).  I pay attention because it’s reasonably smooth and gives me some insight into the US manufacturing economy.

By my own thinking, high capacity utilization suggests generally strong demand for goods and perhaps heralds a need to build more manufacturing capacity (such capital expenditure/building is healthy for the economy). Low capacity utilization suggests plants are running below their capacity. In order to compete for business, companies might lower prices, which could compress profit margins.

Here is the most recent capacity utilization data from 2009-present:

cap utilization 2010-presentSource: Federal Reserve, Bloomberg

 

Here is capacity utilization data from 2000-present (same data, longer time horizon, just for perspective):

cap utilization 2000-presentSource: Federal Reserve, Bloomberg

Capacity utilization has declined since the start of 2015. It’s a small dip, but enough to catch my eye. In short, this is one of many data points of which I’m mindful.

 

Source: Bloomberg, The Federal Reserve

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