Capacity Utilization Hits Highest Point in 3 Months

However, durable goods capacity utilization has contracted two of the last three months compared with one year ago.

In June, durable goods capacity utilization was 75.8%. While this was the highest rate of utilization in three months, June was down 0.1% compared with one year ago, and it was the second time in three months that the month-over-month rate of change contracted.

Annual growth in durable-goods capacity utilization decelerated to 2.0% from 2.2% last month. That is down from its peak of 2.8% in January and its slowest rate of growth since June 2018. As the annual rate of growth tends to lead capital equipment consumption by seven-to-10 months, it is signaling that capital equipment consumption will peak later this fall. However, as machine tool orders have already peaked, capacity utilization is signaling slower growth – if not contraction – for the remainder of 2019.

The GBI: Metalworking backlog index – an excellent leading indicator of capacity utilization in durable goods – indicated a peak in capacity utilization at the end of last year, as the annual rate of growth in backlogs peaked in October 2017. The backlog index tends to lead the annual rate of growth in capacity utilization by seven-to-10 months. Note in the chart that the last two times the growth rate in backlogs decelerated and crossed under the rate of growth in capacity utilization, the rate of growth in capacity utilization peaked in the next couple of months.

Accelerating Growth: aerospace, automotive

Decelerating Growth: durable goods, electronics/computers/telecommunications, forming/fabricating, machinery/equipment, petrochemical processors, primary metals

Accelerating Contraction: construction materials, custom processors, food/beverage processing, furniture, plastics/rubber product, printing, textiles/clothing/leather goods, wood/paper products 

Decelerating Contraction: 

Reports

Top Shops

‘Top Shops’ is a benchmarking and recognition program designed to help shops build their business.

World Machine Tool Survey

An independent annual survey that collects statistics from machine tool consuming and producing countries and compares them in real U.S. dollars.

Capital Spending Survey

An annual survey that collects statistics regarding budgeted spending on machine tools, testing equipment, software and more.

Gardner Business Index

A diffusion index measuring month-to-month changes in activity at durable goods and discrete parts manufacturing facilities.