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32. 1997 Economic Census

1239. Index of Manufacturing Capacity

[1992 output=100. Annual figures are averages of quarterly data. Capacity represents estimated quantity of output relative to output in 1992 which the current stock of plant and equipment in manufacturing industries was capable of producing. Primary processing industries comprise textiles, lumber, paper and pulp, petroleum, rubber, stone, clay, glass, primary metals, fabricated metals and a portion of chemicals. Advanced processing industries comprise chemical products, food, beverages, tobacco, apparel, furniture, printing and publishing, leather, machinery, transportation equipment, instruments, ordnance, and miscellaneous industry groups]

Relation of output to
Index of capacity (percent)
Year capacity
All manu- Primary Advanced
facturing processing processing
1970 69 79 80 79
1971 71 78 79 77
1972 74 83 85 82
1973 76 88 91 86
1974 79 83 85 83
1975 81 73 72 73
1976 84 78 79 78
1977 86 83 84 82
1978 89 85 86 85
1979 92 85 86 85
1980 95 79 77 81
1981 98 78 77 79
1982 100 72 69 73
1983 102 74 74 74
1984 105 80 80 80
1985 109 79 79 79
1986 112 79 80 78
1987 114 81 84 80
1988 116 84 87 82
1989 118 84 86 82
1990 121 81 84 80
1991 123 78 80 77
1992 126 79 82 78
1993 129 80 84 79
1994 133 83 87 80
1995 140 83 87 81
1996 149 82 85 80
1997 158 82 86 81
1998 168 81 84 80
1999 178 80 83 79

Source: Board of Governors of the Federal Reserve System, Capacity Utilization In Manufacturing, Mining, Utilities, and Industrial Materials, G.3., monthly. (Based on data from Federal Reserve Board, Commerce, U.S. Bureau of Labor Statistics, and McGraw-Hill Information Systems Company, New York, NY; and other sources.) *

Industrial Production

Coverage. The industrial production (IP) index measures output in the manufacturing, mining, and electric and gas utilities industries; the reference period for the index is 1992. For the period since 1992, the total IP index has been constructed from 264 individual series based on the 1987 Standard Industrial Classification (SIC). These individual series are classified in two ways: (1) market groups (shown in table 1), such as consumer goods, equipment, intermediate products, and materials; and (2) industry groups (shown in tables 2 and 6), such as two-digit SIC industries and major aggregates of these industries-for example, durable and nondurable manufacturing, mining, and utilities.

Market groups. For purposes of analysis, the individual IP series are grouped into final products, intermediate products, and materials. Final products are assumed to be purchased by consumers, businesses, or government for final use. Intermediate products are expected to become inputs in nonindustrial sectors, such as construction, agriculture, and services. Materials are industrial output requiring further processing within the industrial sector. Total products comprise final and intermediate products, and final products are divided into consumer goods and equipment.

Timing. The first estimate of output for a month is published around the 15th of the following month. The estimate is preliminary (denoted by the superscript "p" in tables) and subject to revision in each of the subsequent three months as new source data become available. (Revised estimates are denoted by the superscript "r" in tables.) After the fourth month, indexes are not revised further until the time of an annual revision or a benchmark revision. The last three benchmark revisions were published in 1990, 1985, and 1976.

Source data. In annual or benchmark revisions, the individual IP indexes are constructed from a variety of source data, such as the quinquennial Censuses of Manufactures and Mineral Industries and the Annual Survey of Manufactures, prepared by the Bureau of the Census; the Minerals Yearbook, prepared by the Department of the Interior; and publications of the Department of Energy. On a monthly basis, the individual indexes of industrial production are constructed from two main types of source data: (1) output measured in physical units and (2) data on inputs to the production process, from which output is inferred. Data on physical products, such as tons of steel or barrels of oil, are obtained from private trade associations as well as from government agencies including those listed above; data of this type are used to estimate monthly IP where possible and appropriate. When suitable data on physical product are unavailable, estimates of output are based on either production-worker hours or electric power use by industry. Data on hours worked by production workers are collected in the monthly establishment survey conducted by the Bureau of Labor Statistics. The data on electric power use are described below. The factors used to convert inputs into estimates of production are based on historical relationships between the inputs and the comprehensive data used to benchmark the IP indexes; these factors also may be influenced by technological or cyclical developments. Especially for the first and second estimates for a given month, the available source data are limited and subject to revision.

Weights. In the index, series that measure the output of an individual industry are weighted according to their proportion in the total value-added output of all industries. The industrial production index, which extends back to 1919, is built as an annually weighted chain-type index since 1977. The components of IP are combined using estimates of value added per unit of output. For months from January to June, the weights are drawn from the year containing the month being estimated and the preceding year; for months from July to December, the weights are drawn from the current and following year. The IP proportions shown in column 1 of tables 1A, 2A, and 6 are estimates of the industries' relative contributions to overall growth in the following year. For example, a 1 percent increase in durable goods manufacturing in 1997 would account for an increase in total IP of nearly 1/2 percent.

Seasonal adjustment. Individual series are seasonally adjusted by the X-11 ARIMA method, developed at Statistics Canada. For series based on production-worker hours, the current seasonal factors were estimated with data through October 1996; for other series, the factors were estimated with data through at least June 1996. In some cases, series were preadjusted for the effects of holidays or the business cycle before using X-11 ARIMA. For the data since 1977, all seasonally adjusted aggregate indexes are calculated by aggregating the seasonally adjusted indexes of the individual series.

Reliability. The average revision to the level of the total IP index, without regard to sign, between the first and the fourth estimates was 0.28 percent during the 1987-96 period. The average revision to the percent change in total IP, without regard to sign, from the first to the fourth estimates was 0.21 percentage point during the 1987-96 period. In most cases (about 81 percent), the direction of change in output indicated by the first estimate for a given month is the same as that shown by the fourth estimate.

Rounding. The published percent changes are calculated from unrounded indexes, and may not be the same as percent changes calculated from the rounded indexes shown in the release.

Capacity Utilization

Definition. Capacity utilization is calculated for the manufacturing, mining, and electric and gas utilities industries. For a given industry, the utilization rate is equal to an output index divided by a capacity index. Output is measured by seasonally adjusted indexes of industrial production. The capacity indexes attempt to capture the concept of sustainable practical capacity, which is defined as the greatest level of output that a plant can maintain within the framework of a realistic work schedule, taking account of normal downtime, and assuming sufficient availability of inputs to operate the machinery and equipment in place. The 76 individual capacity indexes are based on a variety of data, including capacity data measured in physical units compiled by trade associations, surveys of utilization rates and investment, and estimates of growth of the capital input.

Groups. Estimates of capacity and utilization are available for a variety of groups, including primary and advanced processing industries within manufacturing, durable and nondurable manufacturing, total manufacturing, mining, utilities, and total industry. Component industries of the primary and advanced processing groups within manufacturing are listed in the note on tables 2 and 3 of the release.

Weights. Although each utilization rate is the result of dividing an IP series by a corresponding capacity index, aggregate utilization rates are equivalent to combinations of individual utilization rates aggregated with proportions that reflect current capacity levels of output valued in current-period value added per unit of actual output. The implied proportions of individual industry operating rates in the rate for total industry for the most recent year are shown in the first column of table 3.

Perspective. The historical highs and lows in capacity utilization shown in the tables above are specific to each series and did not all occur in the same month. Industrial plants usually operate at capacity utilization rates that are well below 100 percent: none of the broad aggregates has ever reached 100 percent. For total industry and total manufacturing, utilization rates have exceeded 90 percent only


These tables are based on figures supplied by the United States Census Bureau, U.S. Department of Commerce and are subject to revision by the Census Bureau.

Copyright © 2006 Photius Coutsoukis and Information Technology Associates, all rights reserved.