Editor's Note: The following article ran on the Wall Street Journal Web site on Monday Nov. 9.
U.S. manufacturing is finally on the mend — though as many factory bosses are quick to point out, when you’re in a hole this deep, everything looks up. That’s certainly true of capacity utilization.
The numbers show U.S. factories remain “grossly underutilized,” writes Daniel Meckstroth, chief economist of MAPI/Manufacturers Alliance, in a new report. Capacity utilization, which includes manufacturing, mining and utilities, has been hit hard in this recession, reaching 70.5% in September after being in the 80s for years. In the manufacturing sector, factory utilization for September ticked up to 68% — rising from a post World War II record low of 65% in June. Capacity utilization for manufacturing dropped like a rock in this recession, falling from 79% in December 2007. The problem, as Meckstroth notes, is that while any movement upward is welcome, there has to be a lot more growth to simply soak up all those idle machines and assembly lines.
Looking beyond the headline number points to another sobering reality: Some industries were hit much harder than others — and therefore have further to go to get back to more normal utilization. Capacity utilization in primary metals plunged from 86% in December 2007 to 55% currently, mainly because of collapsing demand for some types of steel, while the utilization rate in the computer and peripherals industry fell to 58%, down from 83% in December 2007.
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