Capacity Utilization for Durable Goods Contracts in December

Compared with one year ago, durable goods capacity utilization contracted 2.9% in December.

In December, durable goods capacity utilization was 75.2%, which was slightly below the average utilization for 2019. However, compared with one year ago, capacity utilization contracted 2.9%. This was the seventh month in a row and the eighth of last the nine months that capacity utilization contracted. Additionally, December’s month-over-month contraction was the second-fastest since August 2016.

The annual change in durable goods capacity utilization contracted at an accelerating rate for the second month in a row, falling from -0.2% to -0.7%. December was the fastest rate of annual contraction since May 2017. As the annual rate of change tends to lead capital equipment consumption by seven-to-10 months, capacity utilization is signaling accelerating contraction in capital equipment spending through at least the first half of 2020.

The GBI: Metalworking backlog index tends to lead the annual rate of change in capacity utilization by seven-to-10 months. It has contracted since March and is indicating that capacity utilization will contract into 2020.

Accelerating Growth: electronics/computers

Decelerating Growth: aerospace, forming/fabricating (non-auto), machinery/equipment

Accelerating Contraction: automotive, custom processors, durable goods, furniture, petrochemical processors, plastics/rubber products, primary metals, textiles/clothing/leather goods, wood/paper products

Decelerating Contraction: construction materials, food/beverage processing, printing

Reports

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World Machine Tool Survey

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Capital Spending Survey

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Gardner Business Index

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