Capacity Utilization

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  1. Capacity Utilization Rate Formula | Calculator (Excel template)
  2. Capacity Utilization Rate Formula
  3. Examples and Explanation of Capacity Utilization Rate Formula
  4. Significance and Use of Capacity Utilization Rate Formula
  5. Capacity Utilization Rate Calculator
  6. Capacity Utilization Rate Formula in Excel (With Excel Template)
  7. Recommended Articles
  8. Capacity Utilization Rate – Definition, Meaning, Importance
  9. Capacity utilization rate
  10. Importance of capacity utilization
  11. Reasons why business operate at less capacity utilization
  12. Low demand
  13. Inefficiency
  14. Formula for capacity utilization
  15. Examples of capacity utilization
  16. How to increase full capacity?
  17. Advantages of operating at full capacity
  18. Disadvantages of operating at full capacity
  19. Effects of capacity utilization rate on product and profits
  20. #1. Low utilization
  21. #2. Full utilization
  22. #3. Overutilization
  23. This was all about Capacity Utilization rate
  24. Understanding Capacity Utilization Rates
  25. What is capacity utilization?
  26. How to calculate capacity utilization
  27. What is the ideal capacity utilization rate?
  28. How to improve capacity utilization in business
  29. Monitoring capacity utilization
  30. Capacity Utilization — Definition, Example, and Economic Significance
  31. Formula for Capacity Utilization
  32. Example of Capacity Utilization
  33. Economic Significance of Capacity Utilization
  34. Corporate Capacity
  35. Effects of Low Utilization
  36. Summary
  37. Related Readings
  38. Capacity Utilization Rate (Definition, Formula) | How to Calculate?
  39. Example of Capacity Utilization Rate
  40. Uses
  41. Capacity Utilization Rate Formula Calculator
  42. Capacity Utilization Rate Formula in Excel (with excel template)
  43. Recommended Articles:
  44. The curious case of manufacturing capacity utilization: Why hasn’t it recovered from the Great Recession?
  45. Capacity never recovered
  46. Low capacity utilization is a problem for most industries
  47. Board of Governors of the Federal Reserve System
  48. Market Groups
  49. Industry Groups
  50. Revision of Industrial Production and Capacity Utilization
  51. G.17 Release Tables:

Capacity Utilization Rate Formula | Calculator (Excel template)

Capacity Utilization

Capacity Utilization Rate Formula (Table of Contents)

Capacity Utilization Rate Formula

Investors and management always want to make their company financially strong institution. In order to make institution financially strong, operational efficiency need to improve to save cost and to raise the revenue and profit. So as an analyst or management or investor it becomes imperative to study operation efficiency of the company.

Capacity utilization rate is one of such measure which looks into operational efficiency of the company. Generally, the capacity utilization rate is used in the manufacturing industry.

Here’s the Capacity Utilization Rate formula –

Capacity utilization rate is represented into percentage points.

The above ratio requires two separate operating components.

  • The actual output produced by the firm during the period.
  • And the maximum possible output a firm can produce in a given period of time.

Capacity utilization rate is a ratio which is used to calculate the rate at which maximum capacity or output levels are being manufactured or used.

The capacity utilization rate is displayed as a percentage figure and it can give a proper insight into the estimation capability of the management and the general negligence about the capacity addition by the organization is at a point of time.

Capacity utilization rate is sometimes also called an operating rate of the plant or company.

Capacity utilization rate also helps in finding the economics of scales or diseconomy of scale It also helps in finding out the breakeven of the company and the level at which piece costs per unit will rise. Capacity utilization is generally used in manufacturing companies that manufacture physical products instead of providing services as it is easy to quantify physical goods.

For instance, if we look at a manufacturing firm for a financial year, we should be able to find how much the firm has produced during the financial year; and then we can check how much the firm can actually produce. Comparing these two components will give us a hint about how much capacity the firm has utilized during the financial year.

Examples and Explanation of Capacity Utilization Rate Formula

XYZ company can produce 80,000 toys during a financial year. During the last financial year of 2016, they could only produce 60,000 toys due to the absence of labors. Find out the capacity utilization of XYZ company.

As we already know the actual output of XYZ company during the last financial year of 2016, i.e. 60,000 toys. The potential output is 80,000 toys.

By using the formula of capacity utilization rate, we can calculate –

  • Capacity Utilization Rate = (Actual output/Maximum possible output)*100
  • Capacity Utilization Rate = 60,000/80,000
  • Capacity Utilization Rate = 75 %

From the above, we can also find out the slack of XYZ company during the last financial year of 2016.

  • Slack = (100 % – 75 %)
  • Slack = 25 %

If the capacity utilization rate of a firm is less than 100 %, then the firm can increase its production from the current level of production till the point capacity reaches 100 %.

If we look at it from a different point of view, we will find that this utilization rate shows how much slack in production a firm is doing at a particular time period.

For instance, if we see that the capacity utilization rate is 75% of a company in a given financial year, then we would also be able to find how much the firm couldn’t utilize during that particular financial year. The percentage of capacity that the firm couldn’t utilize during the period is called “slack”. In the above-mentioned example, the slack of the firm during the financial year is = (100 % – 75 %) = 25 %.

Significance and Use of Capacity Utilization Rate Formula

To understand the application of capacity utilization rate, we need to take an example.

  • From the above example, it is clear that capacity utilization shows a clear picture of the operational efficiency of the firm. Higher the utilization rate, higher will be the operational efficiency of the firm.
  • Even capacity utilization rate has a great effect on the economic policies of the company. When policymakers make economic policies, they look at a capacity utilization of the frim to figure out how to stimulate the utilization of capacity in the overall economy.

Capacity Utilization Rate Calculator

You can use the following Capacity Utilization Rate Calculator

Capacity Utilization Rate Formula=
Actual Profitx 100
Maximum Possible Output
=

Capacity Utilization Rate Formula in Excel (With Excel Template)

Here we will do the same example of the Capacity Utilization Rate formula in Excel. It is very easy and simple. You need to provide the two inputs actual output and Maximum possible output

You can easily calculate the Capacity Utilization Rate using Formula in the template provided.

we can calculate Capacity Utilization Rate using Formula

You can find out slack from Capacity Utilization Rate

This has been a guide to a Capacity Utilization Rate formula. Here we discuss its uses along with practical examples. We also provide you Capacity Utilization Rate Calculator with downloadable excel template. You may also look at the following articles to learn more –

Источник: https://www.educba.com/capacity-utilization-rate-formula/

Capacity Utilization Rate – Definition, Meaning, Importance

Capacity Utilization

Capacity utilization is defined as the extent to which the manufacturing and productive capacities of a country, plant, or business entity are utilized in generating services and goods at any given time.

It is the relationship between output produced with the allotted resources and possible output that can be produced when the capacity is fully utilized. The capital utilization rate is popularly, also known as the Operating rate.

Capacity utilization is described as an important metric for calculating the rate at which the probable output level is used or being met. It is expressed as a percentage and is derived by dividing the total capacity with the utilized portion.

It offers an insight into the total resource utilization and how a company can maximize the output without any increase in production costs.

Capacity utilization rate

The capacity utilization rate is an indicator that can assess the operating efficiency of a business and estimate its cost structure effectively.

Importance of capacity utilization

Capacity utilization is considered an important concept because-

  • It is a measure of productive efficiency
  • As there is a rise in the output, the average cost of production tends to fall. Thus high utilization results in lower minimum costs thus making paving the way for competitive business
  • This is why it is vital to aim for full capacity utilization

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To increase capacity utilization, you need to-

Reasons why business operate at less capacity utilization

There are numerous reasons why a business entity operates at less capacity utilization.

Low demand

  • Loss of market share
  • Seasonal demand
  • Reduced overall demand in the market

Inefficiency

  • Employee disruption
  • Poor maintenance
  • Rushed production
  • Poor quality

Formula for capacity utilization

The formula for calculating capacity utilization is

Capacity Utilization = (Actual level of output / maximum level of output) * 100

Examples of capacity utilization

Suppose AB Company manufactures 10,000 units at 10 dollars each and wants to increase its capacity to 20,000 units. The capacity utilization rate is

Capacity Utilization = (Actual level of output / maximum level of output) * 100

Capacity Utilization = (10000/20000) * 100

Capacity Utilization = 50%

If all the resources are utilized, then the capacity rate is 100%, and this indicates full capacity. It is unly that a company achieves 100% rate every time as it can face several hurdles in the production process. 85% capacity utilization is considered good for most companies.

Remember, the capacity utilization rate is used by entities that are related to physical products as it is possible to quantify goods and not services.

How to increase full capacity?

The steps needed to increase full capacity are as follows-

  • Reduce capacity
  • Employ more workers
  • Purchase more raw materials
  • Building larger manufacturing plants to increase its capacity to full

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Advantages of operating at full capacity

The advantages of operating at full capacity are as follows-

  • Minimizes unit cost because the fixed costs per unit are at its lowest possible level
  • Effectiveness
  • Larger volumes
  • Assets are not idle because the entity is using all the fixed assets effectively.
  • Profits tend to be higher as it can generate high revenues
  • The chance of reaching break-even point is high
  • Recruiting employees results in more slots for employment
  • Externally and internally, the firm is perceived as a successful entity. The employees are happy and so are the customers because it associates full capacity with the qualitative product. This results in an improved image, job security, and staff motivation

Disadvantages of operating at full capacity

The disadvantages of operating at full capacity are as follows-

  • Production is rushed, and there is a strain on resources
  • Quality is affected
  • There is less time for quality control
  • Overworked employees
  • Additional workload results in stress
  • It seems de-motivating if it is continued for long
  • Results in loss of sales figures
  • Unable to meet an unexpected increase in demand because you are already working at full capacity
  • Production equipment will require periodical repair and maintenance

Effects of capacity utilization rate on product and profits

Great extent is dependent on market demand. The firm has to schedule productions in such a manner that it will be able to use the available facilities most efficiently.

The key to success is using the manufacturing capacity to the highest level so that you can maximize your profits. The effect of capacity utilization on products and profits are as follows-

#1. Low utilization

When the production capacity is not utilized at its best, the income generated is also not up to the mark. It actually is minimizing your probable profits.

As extra volume will not increase fixed costs, it is important to try for high utilization as it will actually lead to low per-unit cost and high profits.

Also Read  Top 9 Important Features Of Accounting everyone should know

#2. Full utilization

Successful products lead to full capacity utilization and ultimately, quality products and high profitability.

#3. Overutilization

At times when the capacity utilization reaches its peak, you are unable to meet the rising demands, and it can lead to low –quality products.

You have to schedule overtimes and this result in stressed workers, rising costs, more mistakes, and less time for maintenance of equipment. Avoid overutilization as it is a recipe for disaster.

This was all about Capacity Utilization rate

Источник: https://www.marketing91.com/capacity-utilization/

Understanding Capacity Utilization Rates

Capacity Utilization

Capacity utilization rates are a great way to understand the efficiency and productivity of a project or workplace. Understanding how much of your potential capacity you are using is key to evaluating the profitability of your business.  

Whether it’s monitoring physical output or employee productivity, tracking capacity utilization is vital for pinpointing opportunities to improve performance and grow your bottom line. 

What is capacity utilization?

Capacity is the maximum amount of something that can be produced, contained, stored, or accommodated. In business, capacity can refer to any asset associated with creating products or services. 

It can be a measure of production facilities and machinery (i.e., how many products can a plant output in a day, week, or month?) Or, it can assess employee capacity (i.e., how many labor hours does your team have available to work on billable projects?) 

Capacity utilization determines the percentage of capacity that is being used over a set period. By monitoring capacity utilization, companies can tell how efficiently they are operating. For instance, if a company is consistently operating at roughly 50% capacity then, on average, half of its resources are sitting around idle. 

How to calculate capacity utilization

Capacity utilization is calculated and expressed using the capacity utilization rate formula:

(Actual Capacity Being Used/ Total Capacity) x 100

Or

(Actual Output / Potential Output ) x 100

Let’s assume that the potential output for your team is 30 billable hours per day. After tracking actual billable hours, you discovered only 24 hours were charged to client work yesterday. Therefore, your team’s capacity utilization rate yesterday was 80% (24/30 x 100.)

You can also do an employee utilization calculation for each member of your team to see if specific people are underperforming or outperforming the rest. 

Generally, you need to track utilization over an extended period of time to make sure you’re not just assessing performance a bad day or week. One way to do this is to take the totals for the period. For instance, if you want to calculate potential capacity for the month, you multiply possible billable hours per day by the number of workdays in a month. 

To find the average rate for all employees, you can calculate the total potential and actual billable hours for everyone for a set period (i.e., six employees x five hours per day x 20 days per month). Or you can find all of their individual utilization rates and use this formula:

Total employee utilization rates/ Total number of employees

For example, if you had two employees, one with an 80% utilization rate and one with a 90% rate, then the formula would be:

(80% + 90%)/2 = 85%

What is the ideal capacity utilization rate?

A 100% capacity utilization rate would represent full capacity. However, this is not generally a realistic target. Some research indicates 100% utilization is harmful, as it can lead to burnout and lower quality work. 

So what is an ideal capacity utilization rate? 

One way to answer this question is to research trends and benchmarks for your industry and set the average as your goal. Another option is to look at your business’ historical performance.

For instance, let’s say your highest monthly utilization rate in the past twelve months was 85% — you may choose this as your ideal rate.

A final option is to calculate your ideal rate your business costs, product or service pricing, and profit targets. 

The formula is:

(Costs + Profit) / Potential capacity x Billable rate) x 100

It is also sometimes expressed as: 

((Resource costs + overhead + profit margin) / Potential capacity x Billable rate) x 100

Suppose you have an employee who costs $60,000/year, and you allocate overhead costs at 2.5% of labor costs. Now assume your target is a 20% profit margin, and your billable rate is $65/hour. 

If their potential capacity is five billable hours per day for 260 workdays per year, or 1300 hours total, the formula would be:

((60,000 + (60,000 x 2.5%) + (0.20 x 61,500)) / 1,300 hours x $65/hour) x 100

(73,800/ 84,500) x 100

87.3%

In this scenario, their ideal capacity utilization is 87.3%. 

How to improve capacity utilization in business

If your ideal capacity utilization rate seems to be a stretch goal, you can change one of the other variables in the formula to achieve a more attainable rate.

Some options for lowering your target capacity utilization rate are:

  1. Lower the employee’s cost (potentially by replacing with a lower-paid employee)
  2. Decrease your overhead costs 
  3. Reduce your profit margin goals
  4. Increase the employee’s potential capacity (by limiting non-billable work or through unpaid overtime)
  5. Increasing the rate you charge clients for this employee’s effort

Many of these options come with negative side effects. For instance, if you use a cheaper employee, you may have lower quality work. But if you increase the employee’s billable rate, you may lose clients. So, before lowering your targets, it’s worth focusing on improving capacity utilization. 

Here are some ways to improve the capacity utilization rate of your business:

  • Pinpoint the weak links. By analyzing the utilization of each resource separately, you can discover who is underperforming and identify any bottlenecks in your process. For instance, if you have one employee who’s only at 60% capacity, you can focus on coaching, training, or other options to help them improve. 
  • Reduce non-billable work. If your employees only have the capacity for five billable hours in an eight-hour workday, what is taking up the other three hours? You may be able to remove these distractions and increase their overall potential capacity.
  • Take on more clients/ billable work. Maybe utilization is low simply because there isn’t enough billable work to keep your team busy. If this is the case, attracting new business and taking on new projects will boost your capacity utilization rate.   

Monitoring capacity utilization

Understanding your capacity utilization rate is a critical component of evaluating the profitability of your team and business.

With Wrike Resource, our resource planning and scheduling solution, you gain the visibility and flexibility needed to balance your teams’ workloads and optimize your resource utilization.

Want to learn more about how Wrike Resource can benefit your business? Contact us today. 

Источник: https://www.wrike.com/blog/why-capacity-utilization-rates-key-profitability/

Capacity Utilization — Definition, Example, and Economic Significance

Capacity Utilization

Capacity utilization refers to the manufacturing and production capabilities that are being utilized by a nation or enterpriseCorporationA corporation is a legal entity created by individuals, stockholders, or shareholders, with the purpose of operating for profit.

Corporations are allowed to enter into contracts, sue and be sued, own assets, remit federal and state taxes, and borrow money from financial institutions. at any given time.

It is the relationship between the output produced with the given resources and the potential output that can be produced if capacity was fully used.

Capacity utilization can also be defined as the metric used to calculate the rate at which the prospective levels of output are being met or used.

The rate is displayed as a percentage and provides an insight into the total utilization of resources and how a company can increase its output without increasing the costs associated with production.

The capacity utilization rate is also called the operating rate.

Formula for Capacity Utilization

The mathematical formula for calculating capacity utilization is:

Example of Capacity Utilization

Suppose XYZ Company is producing 20,000 and it is determined that the company can produce 40,000 units. The company’s capacity utilization rate is 50% [(20,000/40,000) * 100]. If all the resources are utilized in production, the capacity rate is 100%, indicating full capacity. If the rate is low, it signifies a situation of “excess capacity” or “surplus capacity.”

It is unly that an economy or company will function at a 100% capacity rate as there are always hurdles in the production process (such as the malfunction of equipment or unequal distribution of resources).

A rate of 85% is considered the optimal rate for most companies.

The capacity utilization rate is used by companies that manufacture physical products and not services because it is easier to quantify goods than services.

Economic Significance of Capacity Utilization

If demand in the market increases, it will raise the capacity utilization rate, but if demand decreases, the rate will fall. Economists use the rate as an indicator of inflationInflationInflation is an economic concept that refers to increases in the price level of goods over a set period of time.

The rise in the price level signifies that the currency in a given economy loses purchasing power (i.e., less can be bought with the same amount of money). pressures.

A low capacity utilization rate will result in a decrease in price because there are excess capacity and insufficient demand for the output produced.

Economies with a capacity ratio of much less than 100% can significantly boost production without affecting the associated costs.

Many capitalist economies face high excess capacity rates, and economists use the rate as an argument against capitalismCapitalismCapitalism is an economic system that allows for and encourages the private ownership of businesses that operate to generate profit.

Also known as the market system, capitalism is characterized by private land ownership rights, competitive markets, the stable rule of law, freely operating capital markets, stating that resources are not as well allocated as they could be.

However, regardless of economic conditions, there will never be full capacity utilization as inefficiencies in resource allocation always exist in an economy.

Corporate Capacity

The capacity utilization rate is an important indicator for companies because it can be used to assess operating efficiency and provides an insight into cost structureCost StructureCost structure refers to the types of expenses that a business incurs, and is typically composed of fixed and variable costs.  Fixed costs remain unchanged.

It can be used to determine the level at which costs per unit go up or fall. When there is a rise in output, the average cost of production will decrease. This means that the higher the capacity utilization, the lower the cost per unit, allowing a business to gain an edge over its competitors.

This is why many large companies aim to produce as close to the full capacity rate (100%) as possible.

Although attaining a full capacity rate is not possible, there are ways companies can increase their current utilization rate, including:

  • Employing more staff and encouraging overtime to ensure that all production targets are being met
  • Spending less time on the maintenance of equipment so that more time can be spent on the production of goods
  • Subcontracting some of the production activities

Effects of Low Utilization

Low capacity utilization is a problem for fiscal and monetary policymakers who use such policies to stimulate the economy.

In 2015 and 2016, many European economies such as France and Spain struggled with the consequences of low capacity utilization.

Despite the governments’ intervention through historically low interest rates, inflation remained significantly low with a threat of deflation.

The low capacity utilization led to high unemployment that created slack in the economy, making it hard for prices to react to monetary stimulus. With excess capacity, an increase in the production of goods did not require a significant investment in capital.

When a company faces an increase in demand for its goods, it is often able to meet the demand without raising the cost per unit. The company can optimize its output level with no additional cost for investment in better infrastructure.

Summary

The capacity utilization rate is useful to companies as it provides an insight into the value of production and the resources being utilized at any given time. It determines the company’s ability to cope with a rise in the production of output without increasing costs.

A reduction in the rate indicates an economic slowdown while an increase signifies economic expansion.

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  • Cost of Goods Manufactured (COGM)Cost of Goods Manufactured (COGM)Cost of Goods Manufactured, also known to as COGM, is a term used in managerial accounting that refers to a schedule or statement that shows the total production costs for a company during a specific period of time.
  • DeflationDeflationDeflation is a decrease in the general price level of goods and services. Put another way, deflation is negative inflation. When it occurs, the value of currency grows over time. Thus, more goods and services can be purchased for the same amount of money.
  • Normative EconomicsNormative EconomicsNormative economics is a school of thought which believes that economics as a subject should pass value statements, judgments, and opinions on economic policies, statements, and projects. It evaluates situations and outcomes of economic behavior as morally good or bad.
  • Phillips CurvePhillips CurveThe Phillips Curve is the graphical representation of the short-term relationship between unemployment and inflation within an economy. According to the Phillips Curve, there exists a negative, or inverse, relationship between the unemployment rate and the inflation rate in an economy.

Источник: https://corporatefinanceinstitute.com/resources/knowledge/economics/capacity-utilization/

Capacity Utilization Rate (Definition, Formula) | How to Calculate?

Capacity Utilization

Capacity utilization rate is used to assess a company’s operational efficiency and is also used in a broader perspective to measure the realized potential output. This is important because it shows the company how much they can still utilize.

Here’s the capacity utilization rate formula –

The ratio talks about two separate components.

  • The first one is the actual output produced by the company.
  • And the second is the maximum output a company can produce in a given period.

For example, if we look at a manufacturing company for a month, we would be able to discover how much the company has produced during the month; and then we can check how much the company can actually produce. Comparing these two will give us a hint about how much capacity the company has utilized during the month.

  • If the capacity utilization of a company is less than 100%, then the company can increase its production.
  • If we look at it from another point of view, we will also be able to see that this utilization rate talks about how much slack a company is doing in a particular time period.

For example, if we see that the capacity utilization is 56% of a company in a given month, then we would also be able to discover how much the company couldn’t utilize during that particular month. The percentage of capacity that the company couldn’t utilize is called “slack.” In the above example, the slack of the company during the month is = (100% – 56%) = 44%.

Example of Capacity Utilization Rate

Let’s take a simple example to illustrate this concept

Funny Stickers Co. can produce 60,000 stickers a month. During the last year of 2017, they could only produce 40,000 stickers due to the absence of laborers. Find out the capacity utilization of Funny Stickers Co.

We already know the actual output of Funny Stickers Co. during the last month of 2017, i.e., 40,000 stickers. The potential output is 60,000 stickers.

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By using the formula of capacity utilization, we get –

  • Capacity Utilization = Actual Output / Potential Output * 100
  • Or, Capacity Utilization = 40,000 / 60,000 * 100 = 66.67%.

From the above, we can also find out the slack of Funny Stickers Co. during the last month of 2017.

  • It is = (100% – 66.67%) = 33.33% slack.

Uses

To understand the application of capacity utilization, we need to take an example.

Let’s say that a pen manufacturing company has produced 80,000 pens per month at $1 per unit. If, in a given month, the pen manufacturing company’s potential output is 170,000 pens at the same cost per unit, then the company is running at 47.06% (80,000 / 170,000 * 100) capacity.

From the above example, it’s clear that capacity utilization talks about operational efficiency. The higher the utilization rate, the higher would be the operational efficiency of the company.

Even capacity utilization has a great effect on economic policies. When policymakers make economic policies, they look at capacity utilization to figure out how to stimulate the utilization of capacity in the economy.

Capacity Utilization Rate Formula Calculator

You can use the following this Calculator.

Capacity Utilization Rate Formula ==
Actual Output
X100
Potential Output

Capacity Utilization Rate Formula in Excel (with excel template)

Let us now do the same example above in Excel. This is very simple. You need to provide the two inputs of Actual Output and Potential Output.

You can easily calculate the ratio in the template provided.

You can download this capacity utilization rate template here – Capacity Utilization Rate Excel Template.

This has been a guide to Capacity Utilization Rate and its definition. Here we discuss the formula to calculate capacity utilization rate along with practical examples & uses. Here are the other suggested articles –

Источник: https://www.wallstreetmojo.com/capacity-utilization-rate/

The curious case of manufacturing capacity utilization: Why hasn’t it recovered from the Great Recession?

Capacity Utilization

Manufacturing capacity utilization—an important measure of inflation—is yet to reach pre-recessionary levels. What does this mean for different industries, and for the economy as a whole?

Economists have been debating the performance of business investment during the current recovery. Much of the debate has centered around the relative importance of policy (such as regulation) and demand.

1 Meanwhile, from a company’s perspective, it probably doesn’t make sense to invest when its existing plant and equipment are already underutilized—which seems to be the case for most US businesses.

So maybe fancy explanations aren’t really necessary for the relatively weak investment spending by US companies.

Capacity never recovered

Economic analysts may overlook capacity utilization (CU) for its more significant companion, industrial production. That’s been even truer lately, because CU’s main use has traditionally been to track potential inflationary pressures.

A casual observer of the US economy might therefore be forgiven for not knowing that manufacturing capacity utilization (MCU) has never fully recovered from the Great Recession.

Between early 2005, when MCU fully recovered from the 2001 recession, to the end of 2007, when MCU started falling with the onset of the Great Recession, it was stable at around 79 percent.

During the recession, MCU fell to a low of 64 percent, but had made a partial recovery by early 2012. Since then, it’s been stable at an average of about 75 percent. (See figure 1.)2

Low capacity utilization is a problem for most industries

MCU has declined in almost all industries (see figure 2), the notable exceptions being the aerospace and miscellaneous durable goods industries.

The largest declines were in “other” manufacturing (mostly comprising newspaper, periodical, book, and directory publishing) and printing and related support. The largest declines in MCU, then, occurred in industries related to information.

That’s perhaps not surprising given that these more traditional information methods are being replaced with Internet publishing. (Paper production, however, doesn’t seem to have been affected in the same way.)

It’s also not surprising that wood products (heavily used in building) and furniture (dependent on home sales) remain below pre-recession MCU levels. These industries are both sensitive to home construction, which has not yet completely recovered.

What about petroleum and coal (mostly refining of crude petroleum)? With US crude petroleum production rising after 2011, it’s surprising that capacity utilization at refineries is down over 6 percent. And with chemical feedstock (natural gas) at low prices because of fracking, why would MCU in the chemical industry remain low?

Although many industries have simply stalled at the lower MCU rates, two industries are worth a further look. Figure 3 shows the evolution of motor vehicles and parts (NAICS 3361-3) and computers and electronic equipment (NAICS 334).

Together these two categories account for about 15 percent of the manufacturing IP index. Both play an important role in the economy, but they tell very different stories. Although the average MCU for motor vehicles and parts has been lower in the current recovery, it has also been rising steadily.

The most recent data show MCU for this industry above 80 percent, easily equal to the level in the mid-2000s.

In contrast, MCU for computers and electronic products recovered immediately after the recession, but is now back down. The average level for the past year remains several percentage points below the mid-2000s level.

Motor vehicles, along with aerospace, is ly to start hitting bottlenecks if investment doesn’t pick up. Those industries are outliers, however. Most industries still have excess capacity—at least, compared to pre-recession levels.

Low manufacturing capacity utilization suggests there is little reason to be concerned about shortages, bottlenecks, and rising prices in most industries. That leads to two important points about the economy. First, risks of inflation are very low.

If demand picks up, businesses have the capital to meet that demand, and may not be able to raise prices because of a shortage of productive capacity.

Second, with overall capacity still below the pre-recession level, investment spending may remain soft—even if profits are high and the cost of capital is low.

Источник: https://www2.deloitte.com/global/en/insights/economy/behind-the-numbers/manufacturing-capacity-utilization-recovery-from-recession.html

Board of Governors of the Federal Reserve System

Capacity Utilization

Release Date: November 17, 2020

Revision of Industrial Production and Capacity Utilization Notice Below

Industrial production rose 1.1 percent in October. The index has recovered much of its 16.5 percent decline from February to April, but output in October was still 5.6 percent lower than its pre-pandemic February level. After edging up 0.

1 percent in September, manufacturing output increased 1.0 percent in October. The output of utilities rose 3.9 percent, while the output at mines declined 0.6 percent to a level that was 14.4 percent below its year-earlier reading. At 103.

2 percent of its 2012 average, total industrial production was 5.3 percent lower in October than it was a year earlier. Capacity utilization for the industrial sector increased 0.8 percentage point in October to 72.8 percent, a rate that is 7.

0 percentage points below its long-run (1972–2019) average but 8.6 percentage points above its low in April.

Seasonally adjusted

Industrial production 2012=100 Percent change 2020 2020 Oct. '19 to
Oct. '20 May[r] June[r] July[r] Aug.[r] Sept.[r] Oct.[p] May[r] June[r] July[r] Aug.[r] Sept.[r] Oct.[p]Total indexPrevious estimatesMajor market groupsFinal ProductsConsumer goodsBusiness equipmentNonindustrial suppliesConstructionMaterialsMajor industry groupsManufacturing (see note below)Previous estimatesMiningUtilities
92.197.6101.7102.5102.1103.2.96.04.2.7-.41.1-5.3
91.997.6101.7102.2101.5.76.24.2.4-.6
86.093.297.898.898.098.84.58.35.01.0-.8.8-3.4
91.598.8103.6104.2103.2104.04.48.04.8.7-1.0.8-.6
74.083.188.890.990.390.86.912.26.92.3-.6.6-8.9
93.696.799.2100.4100.2102.11.93.22.61.2-.22.0-5.6
104.3106.3108.2109.9110.5112.43.02.01.71.6.61.6-3.5
96.7101.4105.6105.9105.8106.9-2.44.94.1.3.01.0-6.9
87.093.597.498.898.999.93.87.44.21.4.11.0-3.9
86.993.597.498.598.33.67.64.21.2-.3
108.0110.6114.9113.5114.9114.2-11.32.43.8-1.21.2-.6-14.4
100.2101.5106.7104.999.4103.3-.71.35.1-1.7-5.23.9-3.0

Capacity utilization Percent of capacity Capacity
growth Average1972-

2019

1988-89

high

1990-91

low

1994-95

high

 2009

low

 2019

Oct.

   

2020 Oct. '19 to
Oct. '20 May[r] June[r] July[r] Aug.[r] Sept.[r] Oct.[p]Total industry

Previous estimatesManufacturing (see note below)Previous estimatesMiningUtilitiesStage-of-process groupsCrudePrimary and semifinishedFinished
79.885.178.885.066.777.064.868.771.772.272.072.8.2
64.768.771.672.071.5
78.285.577.384.663.774.662.467.069.970.971.071.7.0
62.267.069.870.770.5
87.286.384.388.678.389.772.874.777.877.178.277.9-1.5
85.293.284.793.278.277.371.572.375.874.370.272.73.1
86.287.884.790.076.488.373.875.577.877.978.578.7-1.2
80.386.478.187.863.975.163.767.069.770.169.771.0.4
76.783.377.380.666.573.661.767.370.871.771.371.7.5
[r] Revised. [p] Preliminary.

Market Groups

Every major market group posted gains in October. The output of consumer goods rose 0.8 percent, with broad-based gains among its components. After falling more than 17 percent between February and April, the index for consumer goods rebounded quickly and in October it was within 1.

7 percent of its February level. The production of business equipment moved up 0.6 percent in October, but it was still 7.3 percent lower than it was in February. The indexes for defense and space equipment, construction supplies, business supplies, and materials each advanced 1.

0 percent or more in October.

Industry Groups

Manufacturing output increased 1.0 percent in October; even so, it was about 5 percent below its level in February. The index for durable manufacturing stepped up 0.

9 percent, as small drops in the indexes for furniture and related products, fabricated metal products, and motor vehicles and parts were outweighed by gains elsewhere, especially for aerospace and miscellaneous transportation equipment and for miscellaneous manufacturing. The index for nondurables rose 1.

2 percent; nearly all of its components posted gains. The output of other manufacturing (publishing and logging) fell 1.5 percent.

The index for utilities moved up 3.9 percent in October, with an increase for electric utilities more than offsetting a decrease for natural gas utilities. Mining output declined 0.6 percent, as oil and gas extraction fell back in October after posting a gain in September.

Capacity utilization for manufacturing rose 0.7 percentage point in October to 71.7 percent, 11.6 percentage points higher than its trough in April but still 6.5 percentage points below its long-run average.

The utilization rate for mining declined to 77.9 percent, remaining below its long-run average of 87.2 percent. The operating rate for utilities increased to 72.7 percent, a rate that is 12.

5 percentage points below its long-run average.

Revision of Industrial Production and Capacity Utilization

The Federal Reserve Board plans to issue its annual revision to the indexes of industrial production (IP) and the related measures of capacity utilization in early 2021.

New annual benchmark data for manufacturing for 2017 and 2018 will be incorporated, as well as other annual data, including information on the mining of metallic and nonmetallic minerals (except fuels).

The weights for market-group splits of the industry-level indexes will be updated with information from the 2012 benchmark input-output accounts from the U.S. Bureau of Economic Analysis.

The updated IP indexes will include revisions to the monthly indicator (either product data or input data) and to seasonal factors for each industry. In addition, the estimation methods for some series may be changed. Any modifications to the methods for estimating the output of an industry will affect the index from 1972 to the present.

Capacity and capacity utilization will be revised to incorporate data for manufacturing through the fourth quarter of 2019 from the U.S. Census Bureau's Quarterly Survey of Plant Capacity Utilization, along with new data on capacity from the U.S. Geological Survey, the U.S. Department of Energy, and other organizations.

G.17 Release Tables:

  • Summary: Industrial Production and Capacity Utilization
  • Chart 1: Industrial Production, Capacity, and Capacity Utilization
  • Chart 2: Industrial Production and Capacity Utilization
  • Chart 3: Industrial Production of Selected Industries
  • Table 1: Industrial Production: Market and Industry Groups (percent change)
  • Table 2: Industrial Production: Special Aggregates and Selected Detail (percent change)
  • Table 3: Motor Vehicle Assemblies
  • Table 4: Industrial Production Indexes: Market and Industry Group Summary
  • Table 5: Industrial Production Indexes: Special Aggregates
  • Table 6: Diffusion Indexes of Industrial Production
  • Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities
  • Table 8: Industrial Capacity: Manufacturing, Mining, and Utilities (percent change)
  • Table 9: Industrial Production: Gross Value of Products and Nonindustrial Supplies
  • Table 10: Gross-Value-Weighted Industrial Production: Stage-of-Process Groups
  • Table 11: Historical Statistics for IP, Capacity, and Utilization: Total Industry
  • Table 12: Historical Statistics for IP, Capacity, and Utilization: Manufacturing
  • Table 13: Historical Statistics for IP, Capacity, and Utilization: Total Industry excluding Selected High-Technology Industries
  • Table 14: Historical Statistics for IP, Capacity, and Utilization: Manufacturing excluding Selected High-Technology Industries
  • Table 15: Industrial Production: Reliability Estimates

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Last Update: November 17, 2020

Источник: https://www.federalreserve.gov/releases/g17/current/

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