July 2015 Economic Indicators

Melanie Garza - Director of Strategy & Growth

Capacity Utilization Spikes in Some Industries

While the average domestic manufacturing plant utilization fell slightly in May, a number of industries are at more than 80% of capacity. The U.S. Census Bureau reports average industrial capacity was at 77.8% for May down from 78% in April. In May of 2014, industrial capacity was also 77.8%; however the list of industries over 80% capacity is climbing.

Economists believe that when an industry capacity is over 80%, expansion often occurs. Industries now reporting greater than 90% capacity include: paperboard mills, light truck & utility vehicles, pulp mills and ethyl alcohol. Those over 80% capacity include: semiconductor, tire manufacturing, aerospace, miscellaneous manufacturing, paper mills, grain, dairy and meat processing, automobile, organic chemicals, glass and furniture.

Machinery manufacturing, engine, turbine and power transmission equipment along with petrochemicals and petroleum are all now over 78% capacity.

Those reporting the largest change in growth include clothing from 53.7% to 71%, nonferrous metal from 50.3% to 55.9% and semiconductors up from 81.4% to 88.7%.

Manufacturing Continues to Rise

The manufacturing sector is rising steadily, signaling a growing economy. The Institute for Supply Management (ISM) reported the PMI grew .7% in June over May and climbed to 53.3%. This is the 30th consecutive month manufacturing grew. A reading above 50 percent indicates that the manufacturing economy is generally expanding.

At an annualized rate of 53.3%, economists would expect the economy as a whole to grow 3.3% in 2015.

The full report includes New Orders index up .2%; the Production Index fell .5%; the Employment Index jumped 3.8%; and Inventories of raw materials climbed 1.5%.

Comments from the panel indicate mostly stable to improving business conditions, with the notable exception relating to the oil and gas markets. Of the 18 manufacturing industries, 11 are reporting growth in June in the following order: Furniture & Related Products; Wood Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; Chemical Products; Paper Products; and Computer & Electronic Products. The four industries reporting contraction in June are: Petroleum & Coal Products; Primary Metals; Plastics & Rubber Products; and Machinery.

Questions or comments? Please contact Melanie Garza at mgarza@teamCOACT.com.