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Capacity Utilization Rate

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The capacity utilization rate is the value of production capacity which is actually being utilized over a specific period of time. The capacity utilization rate is measured in percentages and is adjusted to reflect production aptitude of various capital goods and natural resource producers, as well as factories, utilities and the like. Although lower capacity utilization rate yields potential for increased output, eighty five percent tends to be a critical benchmark value. Having surpassed the eighty five percent barrier, the capacity utilization rate may signal a possibility of impending inflation. The capacity utilization rate is an important measure of economic performance. Thus, the capacity utilization rate is carefully analyzed by the Fed. However, the capacity utilization rate does not invariably provide most accurate feedback of economic and market conditions. Hence, the capacity utilization rate is corroborated with other economic indicators to elucidate the overall economic posture.



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