Full text: Trend and Cycle

Revised estimates of capacity and capacity utilization 
The Federal Reserve has developed new estimates of 
industrial capacity and capacity utilization for the pe 
riod since 1967 in conjunction with the revision of the 
index of industrial production that has just been com 
pleted. These new estimates cover manufacturing, min 
ing, and utilities and industrial materials. 
Within manufacturing, three additional series are 
now published: (1) primary metals, a combination of 
the published series for iron and steel and nonferrous 
metals; (2) other durables, which covers lumber and 
products, furniture, miscellaneous manufacturing, and 
government owned and operated ordnance facilities; 
and (3) other nondurables, which covers tobacco pro 
ducts, apparel, printing and publishing, and leather 
and products. 
In the interrelated system of industrial production 
and capacity indexes and utilization rates, each utiliza 
tion rate, expressed in percentage form, is the ratio of 
an industrial production index to a related capacity in 
dex. The capacity indexes are developed from a variety 
of data and are designed specifically to be used in con 
junction with the industrial production indexes; the ca 
pacity indexes parallel the industrial production 
indexes with respect to the names of series and groups, 
weights, and aggregation and linking procedures. 
The output and capacity indexes have been revised 
in several ways. Both indexes are now expressed as 
percentages of output in 1977 (chart 1) instead of 1967 
and consequently tend to have lower numerical values 
than formerly. This rebasing does not, however, affect 
the derived utilization rates. Changes in these rates re 
flect not only the incorporation of more complete 
data, but also the introduction of new series, changes 
in the Standard Industrial Classification, and the up 
dating of the value-added weights that are used to 
combine both the output and capacity indexes. 
Capacity utilization rates in general have been re 
vised slightly downward as a result of an upward revi 
sion in capacity relative to output. In December 1984 
the overall rate for manufacturing, mining, and utili 
ties was 81.1 percent, 0.1 percentage point down from 
the previous estimate. Over the whole 1967-84 period 
the capacity utilization rate averaged 81.7 percent com 
pared with 82.0 percent previously (summary table). 
The new estimates, like the previous set, show that the 
early 1980s have been characterized by rates of utiliza 
tion of industrial capacity that were below or at best 
equal to the 1967-84 average. 
The new capacity indexes, like the old ones, grew 
more slowly after the oil embargo in late 1973 and 
slowed further after 1979,'but the retardation after 
1979 is not as severe as was previously shown. From 
December 1967 to December 1973, industrial capacity 
grew at an annual rate of 3.9 percent; it declined to a 
rate of 3.2 percent between December 1973 and De 
cember 1979; and then to 2.9 percent from December 
1979 to December 1984. Although the revised rates of 
capacity growth for the 1967-73 and 1973-79 periods 
1. Output, capacity, and utilization 
Ratio scale, 1977 output = 100 
1967 1970 1975 
1967 1970 1975 

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