Capacity Utilization Contraction Accelerates for Third Month

Capacity utilization in durable goods contracted 1.9% compared with one year ago.

In September, durable goods capacity utilization was 75.4%, which was the slowest rate of durable goods capacity utilization since April. Compared with one year ago, capacity utilization contracted 1.9%. This was the third month in a row of accelerating contraction and the fastest rate of month-over-month contraction in three years.

Annual growth in capacity utilization of durable goods decelerated to 0.8% from 1.3% in September. 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. Capacity utilization is signaling machine tool orders will contract for the remained of 2019 and into 2020.

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 in 2020.

Accelerating Growth: 

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

Accelerating Contraction: construction materials, custom processors, food/beverage processing, furniture, petrochemical processors, 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.