On Wednesday the Federal Reserve will release this week's most important economic data: August industrial production and capacity utilization figures.
Much hope for the recovery relies upon an industrial rebound. Businesses have improved their profit margins, but sales must also grow for earnings.' continued expansion. Rising capacity utilization signals that industry is using a greater share of its plant and equipment in order to meet a larger volume of orders. This is good news by itself, but also may signal industry's need to invest in additional plant and equipment if capacity utilization rises steeply. That would help the construction sector and heavy machinery and equipment manufacturers.
Capacity Utilization
(Click on chart to enlarge.)
Recessions shaded
The chart reveals how badly industry tumbled during the recession. It also shows the beginning of a rebound. Keep your eye on capacity utilization over the coming months. If the rate climbs past 75% and up toward 80%, that's a good sign that we're heading out of the doldrums.
(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)
© 2010 Michael B. Lehmann
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