Capacity Utilization

It’s a simple concept that’s hard to track. Capacity utilization measures what percent businesses are using existing capabilities. 100% marks an economy “firing on all cylinders,” as the corporate catchphrase goes. When consumer demand drops, so too does capacity utilization… and since 1970, it hasn’t picked up until the worst is over.

Yesterday, capacity utilization in the U.S. found a record low of 68.3%. The Federal Reserve said utilization fell another 0.7 percentage points from April to May, to the lowest score since at least 1967, when they started keeping track. Factory output is down 13.4% over the last year, the biggest drop since 1946.