Capacity Utilization Keeps Heading in the Right Direction

The Federal Reserve has released data showing that industrial production and capacity utilization rates both rose in December. When you consider that the entire media and business focus was around the coming fiscal cliff at the time, this is impressive.

Industrial production rose 0.3%, and that was the highest output since mid-2008. The capacity utilization rate also rose by 0.1% on a revision to 78.8%. Dow Jones was calling for a 0.3% gain in production but was only looking for a reading of 78.5% in capacity.

Manufacturing output was up a total of 0.8% from the prior month, but it was up by 2.4% from the prior year. If you exclude auto manufacturing being up 4.3%, the overall manufacturing gains were up by 0.8%.

Our focus is on the rise in total capacity utilization. This may not sound like much of an improvement, and it still has much room to grow if the U.S. and global economy can ever live up to the full potential. We are still under the old 80% norm from before the recession, but this is still a step in the right direction. The difference is that if capacity keeps rising, it implies more jobs and lower unemployment rates ahead. It also could imply that more workers in America are using their hands for work rather than shuffling papers and calling in orders to other countries. This capacity has been an area that has been very hard to find any real good news as the last 80% capacity month was all the way back in March of 2008.

Sometimes less-bad is close to good enough.

Filed under: 24/7 Wall St. Wire, Economy, Labor & Unions