Capacity Utilization Contraction Accelerates

August was the second month in a row of accelerating contraction and the fastest rate of month-over-month contraction since November 2016.

In August, durable goods capacity utilization was 76.0%, which was the highest rate of durable goods capacity utilization since March. However, compared with one year ago, capacity utilization contracted 0.9%. This was the second month in a row of accelerating contraction and the fastest rate of month-over-month contraction since November 2016.

Annual growth in capacity utilization of durable goods decelerated to 1.3% from 1.7% in August. That is down from its peak of 2.8% in January, and its slowest rate of growth since November 2017. As the annual rate of growth tends to lead capital equipment consumption by seven-to-10 months, it is signaling further downward movement in the rate of change in capital equipment. Since machine tool orders have grown slower for months, capacity utilization is signaling a contraction is just around the corner.

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. It has contracted since March and is indicating that capacity utilization will contract at least through the end of 2019.

Accelerating Growth: aerospace

Decelerating Growth: automotive, 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.