US industry: capacity utilization
US industry capacity utilization was 79.8 percent last March, up 1.4 percent from March 2022 to March 2023.
At the same time, industrial production rose 0.4 percent in March and was little changed in the first quarter, increasing at an annual rate of 0.2 percent.
In particular, manufacturing and mining output each fell 0.5 percent last March.
The Federal Reserve‘s capacity and utilization measures use a definition of capacity that attempts to capture the concept of maximum sustainable output: the highest level of production that an industry can maintain under a realistic work schedule, after accounting for normal downtime and assuming sufficient availability of inputs to operate the capital in place.
Other definitions of capacity are sometimes used in industry capacity reports, with necessarily different estimates as a result.
For example, capacity estimates for light motor vehicles reflect, for each assembly plant and model year, data on line speed (the number of vehicles produced per hour), workweek (the number of shifts operated per day multiplied by the number of hours per shift), and the number of workdays per year.
The Federal Reserve obtains data on assembly plant shifts and production line speeds from Ward’s Automotive Yearbooks and other sources. (Changes in line speeds are inferred from changes in plant capacity when line speeds are not directly reported.)
For all of 2022, U.S. industrial production increased 3.8% in real annual change, supported by manufacturing output, which grew 3.0% annually.
From January to February 2023, manufacturing production showed a cumulative variation of 1.4%, while vehicles and auto parts, electrical equipment and machinery showed annual growth of 0.4, 1.9 and 2.5%, respectively, while electronics and plastics decreased 0.5 and 1.6%, in that order.
The increase in manufacturing is a reflection of the normalization of supply chains and the reduction in maritime transportation costs, shorter delivery times of final products and inputs, as well as the strength of private consumption of durable goods, which rebounded in January 2023, after having moderated its growth in the last quarter of the previous year.