Capacity Utilization Headed in the Right Direction

By Thomas P. Gale

October 21, 2009

More about: Economy, MDM Blog

Forecasts have been raised for the first quarter 2010.

The good news is that the manufacturing capacity utilization rate is finally headed in the right direction. Many MDM subscribers see a direct tie (lagging a few months) between revenue levels and manufacturing capacity utilization.

As Adam Fein notes in his Distribution Trends blog (Growth Ahead for Industrial Distributors), manufacturing capacity utilization grew at an annualized rate of 7.7% in the third quarter. That and other indicators, including accelerating U.S. exports as the rest of the world recovers faster than the U.S., is causing Fein to raise his forecasts for industrial distribution with “slightly positive” year-over-year growth in the first quarter of 2010. The weakening dollar also is helping exports.

MDM will feature Fein in its upcoming 2010 Economic Outlook for Wholesale Distribution Nov. 19.

As always, find the latest economic indicator news in the MDM Databank. Here is the latest Industrial Production/Capacity Utilization report.

The graphic below, from the Federal Reserve, shows capacity utilization rates over time through the current quarter. Grey bars indicate times of recession.

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