Supply Chain News Bites - Only from SCDigest
 

-Novermber 19, 2009

 
 

Supply Chain Graphic of the Week: US Factory Utilization Recovering from Worst Levels Since 1982

 
  Jump in September Good News After Utilization Drops to 26-Year Low; Recession Impact Varies Widely by Manufacturing Sector  
     
 

By SCDigest Editorial Staff

 
 

The impact of the recession on US manufacturing has been severe, with overall factory utilization reaching a low of just 65% in June of this year.

To put that in perspective, that was the lowest level seen since the 1982 recession, as shown in the chart below. It also represents a 14-point drop from the recent peak of 79% in December, 2007.

The modestly good news - utilization increased three points in September to 68%.

It is also interesting to see how high utilization has gone in the past - up over 90%, for examole, in the early 1960s.

 

As always, however, the impact is not evenly felt. As shown in the other chart below, the hit to utilization has varied tremendously across manufacturing sectors. While every single sector has had a decline since the Dec. 2007 peak, the damage ranged from an incredible 31-point decline in metals factory utilization and 25 points in the high-tech sector, to nearly flat in the oil patch, and just a 2% decrease in food factories. You have to keep eating.

 

Of course, this decline in utilization has been paralled almost exactly by a decline in investment in manufacturing, according to data from The Manufacturing Alliance/MAPI.

A recent report notes that "Looking forward to 2010, there is both good and bad news for business investment. The good news is that the industrial recovery is underway and factory utilization is rising again. The bad news is that the improvement in the utilization rate is coming off the lowest level in well over a half-century. We expect to see growth in business equipment spending in 2010 in the areas of high tech, transportation equipment, and business software. Spending on business structures, on the other hand, should continue to decline next year."

 

Agree or disagree? What is your perspective? Let us know your thoughts at the Feedback button below.

 
 
Send an Email