Capacity Utilization: Total Industry (TCU) is the percentage of resources used by corporations and factories to produce goods in manufacturing, mining, and electric and gas utilities for all facilities located in the United States (excluding those in U.S. territories).(1) We can also think of capacity utilization as how much capacity is being used from the total available capacity to produce demanded finished products.
Capacity utilization indexes are constructed for 71 industries in manufacturing, 16 in mining, and 2 in utilities. (1) Physical data on capacity utilization are primarily compiled from trade sources and government sources, such as the U.S. Geological Survey and the U.S. Energy Information Administration.(1) When physical data are unavailable, capacity utilization data are compiled from the U.S. Census Bureau’s Quarterly Survey of Plant Capacity Utilization, which provides data for almost 70 percent of total industry capacity.(1) Additionally, the capacity index is developed on a monthly basis, designed to be consistent with the production index.(1)
According to the Board of Governors of the Federal Reserve System, the capacity index tries to conceptualize the idea of sustainable maximum output, which is defined as the highest level of output a plant can sustain within the confines of its resources. The Board of Governors defines the seasonally adjusted capacity utilization rate as the output index divided by the capacity index. The capacity utilization rate can also implicitly describe how efficiently the factors of production (inputs in the production process) are being used. (1) It sheds light on how much more firms can produce without additional costs. Additionally, this rate gives manufacturers some idea as to how much consumer demand they will be able to meet in the future.
The Federal Reserve strives to construct a capacity index consistent with time by using different relevant data sources.(1) Developing an index that is reasonable given the time period is the primary aim for this index, but there are still some difficulties. Extensive technological and structural changes have and will continue to occur, affecting the degree of tightness the Federal Reserve index of capacity utilization will represent.(2) In addition, each series of capacity utilization is flawed by commission; therefore, they should be used with caution.(2)
(1) Board of Governors of the Federal Reserve System. “Industrial Production and Capacity Utilization.” Statistical release G.17;. May 15, 2013.
(2) Bauer, Paul W. and Deily, Mary E. “A User’s Guide to Capacity- Utilization Measures.” Economic Commentary. Federal Reserve Bank of Cleveland, July 1, 1988; https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/economic-commentary-archives/1988-economic-commentaries/ec-19880701-a-users-guide-to-capacity-utilization-measures.aspx.
Board of Governors of the Federal Reserve System (US), Capacity Utilization: Total Industry [TCU], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TCU, November 23, 2017.
Source: U.S. Bureau of Labor Statistics
Release: Consumer Price Index
The Consumer Price Index for All Urban Consumers: All Items (CPIAUCSL) is a measure of the average monthly change in the price for goods and services paid by urban consumers between any two time periods.(1) It can also represent the buying habits of urban consumers. This particular index includes roughly 88 percent of the total population, accounting for wage earners, clerical workers, technical workers, self-employed, short-term workers, unemployed, retirees, and those not in the labor force.(1)
The CPIs are based on prices for food, clothing, shelter, and fuels; transportation fares; service fees (e.g., water and sewer service); and sales taxes. Prices are collected monthly from about 4,000 housing units and approximately 26,000 retail establishments across 87 urban areas.(1) To calculate the index, price changes are averaged with weights representing their importance in the spending of the particular group. The index measures price changes (as a percent change) from a predetermined reference date.(1) In addition to the original unadjusted index distributed, the Bureau of Labor Statistics also releases a seasonally adjusted index. The unadjusted series reflects all factors that may influence a change in prices. However, it can be very useful to look at the seasonally adjusted CPI, which removes the effects of seasonal changes, such as weather, school year, production cycles, and holidays.(1)
The CPI can be used to recognize periods of inflation and deflation. Significant increases in the CPI within a short time frame might indicate a period of inflation, and significant decreases in CPI within a short time frame might indicate a period of deflation. However, because the CPI includes volatile food and oil prices, it might not be a reliable measure of inflationary and deflationary periods. For a more accurate detection, the core CPI (Consumer Price Index for All Urban Consumers: All Items Less Food & Energy [CPILFESL]) is often used. When using the CPI, please note that it is not applicable to all consumers and should not be used to determine relative living costs.(1) Additionally, the CPI is a statistical measure vulnerable to sampling error since it is based on a sample of prices and not the complete average.(1)
For more information on the consumer price indexes, see:
(1) Bureau of Economic Analysis. “CPI Detailed Report.” 2013; http://www.bls.gov/cpi/.
Handbook of Methods - (http://www.bls.gov/opub/hom/pdf/homch17.pdf)
Understanding the CPI: Frequently Asked Questions - (http://stats.bls.gov:80/cpi/cpifaq.htm)
U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items [CPIAUCSL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CPIAUCSL, November 23, 2017.