In January, durable goods capacity utilization was 73.7%, which was the highest rate of capacity utilization since February 2020. The capacity utilization rate has increased every month since April 2020. Compared with one year ago, capacity utilization contracted 1.4%, which was the slowest rate of contraction since August 2019. 

The annual change in durable goods capacity utilization contracted at a decelerating rate for the first time this cycle, ending a string of 14 months of accelerating contraction. It seems clear that the annual rate of change has bottomed out. As the annual rate of change tends to lead capital equipment consumption by seven to 10 months, capacity utilization is signaling a bottom in the annual rate of change in capital equipment about the second quarter of 2021.

The GBI: Metalworking backlog index tends to lead the annual rate of change in capacity utilization by seven to 10 months. In January, the backlog index was above 50, indicating growth in backlogs for the second straight month. The backlog index grew 7.4% compared with one year ago. This was the fifth straight month of growth. The annual rate of contraction in the Backlog index reached a bottom in June and has contracted at a decelerating rate for seven months, indicating that the annual rate of change in capacity utilization should see decelerating contraction for most of 2021.

Accelerating Growth: 

Decelerating Growth: 

Accelerating Contraction: construction materials, electronics/computers, forming/fabricating (non-auto), furniture, petrochemical processors, primary metals, printing, textiles/clothing/leather goods, wood/paper products

Decelerating Contraction: aerospace, automotive, custom processors, durable goods, food/beverage processing, machinery/equipment, plastics/rubber products