Capacity Utilization Hits Highs Not Seen Since 2008

The dual report on industrial production and capacity utilization for the month of July was released on Friday. While these were basically inline with estimates, there are some points worth noting that still have very positive implications for the economic recovery.

Production in July rose by 0.4%, slightly exceeding the 0.3% gain expected by Bloomberg. The June production report was revised higher to 0.4% from 0.2% initially.

Capacity utilization came in at 79.2% in July. This met the Bloomberg economists consensus expectation, and was up by 0.1% from June.

What really stands out here is manufacturing activity. This index component rose by a full 1.0% in July, after rising 0.3% in June. Also worth noting is that durable goods production rose by 1.7% in July, and up more than 8% from July of 2013 — with gains in almost all sub-indexes.

Another observation is that while the capacity utilization rate of 79.2% may have only been up by one-tenth of a percent in July, it was a post-recovery high dating back to June of 2008, when capacity was starting to fall off a cliff.

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