November 2013 Economic Indicators
Melanie Garza - Director of Operations
Manufacturing Capacity Nears Benchmark for Growth
Manufacturing Capacity in the United States is signaling a stronger economy. The Federal Reserve reported that capacity utilization in September grew to 76.1%. Economists note that as utilization reaches more than 80%, investments in plant and equipment are more likely to occur. This news follows the recent ISM Manufacturing Index from September where factories reached their highest level of utilization, since April 2011.
The manufacturing index bottomed out in 2009 at 64% while the highest levels were reached in 1994-95 at 84.6%, although operations were considered much less efficient. Over the past several years, factories have employed lean manufacturing methods to eliminate waste.
The fabricated metal products industry group has completely recovered climbing to its previous record of 85% back in the mid-90’s. Additional industries with higher than 80% utilization include: Petroleum and coal at 83.2%; machinery and paper both at 82.2%; and electrical equipment and appliances with 81.2%. Other industries flirting with the 80% benchmark are: food and beverage at 79.9%; motor vehicles with 77.1% and durable manufacturing at 76.4%.
Meanwhile wood products, nonmetallic mineral products and printing all have excess capacity with utilization less than 70%.
Durable Goods Orders Post Slight Increase
The Commerce Department posted a 3.7% gain in durable goods orders in September over August; however the growth may be deceiving. Nearly all the growth is attributed to new aircraft orders which saw a 57. 5% increase in September. Orders for nondefense aircraft and parts climbed $6.9 billion.
Economists say the impending government shutdown in October likely slowed factory orders for machinery and other durable goods. Excluding aircraft orders, the index actually fell 1.1% in September.
The September figure reflected an $8.2 billion or 3.7% increase to $233.4 billion. In five of the last six months durable goods orders have risen.
Questions? Please contact Melanie Garza at mgarza@teamCOACT.com