Curious Cat Investing Dictionary: Capacity Utilization

Capacity Utilization - "The Federal Reserve's monthly index of industrial production and the related capacity indexes and capacity utilization rates cover manufacturing, mining, and electric and gas utilities. The industrial sector, together with construction, accounts for the bulk of the variation in national output over the course of the business cycle. The industrial detail provided by these measures helps illuminate structural developments in the economy.
The production index measures real output and is expressed as a percentage of real output in a base year, currently 1997. The capacity index, which is an estimate of sustainable potential output, is also expressed as a percentage of actual output in 1997. The production indexes are computed as Fisher indexes since 1972; the weights are based on annual estimates of value added. The rate of capacity utilization equals the seasonally adjusted output index expressed as a percentage of the related capacity index. Federal Reserve web site July 2004.
From 1972 to 2003 the capacity utilization rate averaged 81.1% (with a low of 70.9 and a high of 85.2).

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