Keywords: Capacity, utilization, investment, price
Abstract: In this paper, we review the history and concepts behind the Federal Reserve's measures
of capacity and capacity utilization, summarize the methods used to construct the
measures, and describe the principal source data for these measures--the Census
Bureau's Survey of Plant Capacity. We show that the aggregate manufacturing
utilization rate from the Survey of Plant Capacity does not exhibit the "cyclical bias"
possessed by utilization rates from the less statistically rigorous utilization rate surveys
previously used to estimate the Federal Reserve's measures. At the detailed industry
level, utilization rates from the Survey of Plant Capacity for several industries do appear
to possess a cyclical bias, but we demonstrate that this bias is removed in the construction
of the Federal Reserve capacity measures. We further show that the Federal Reserve
measures, by combining the Census survey utilization rates with other indicators of
capacity, do not discard significant information contained in the Census rates. In fact, the
Federal Reserve procedures add to the predictive content of the Census utilization rates in
models of capital spending, capacity expansion, and changes in price inflation.
Full paper (322 KB PDF)
Home | FEDS | List of 2004 FEDS papers
To comment on this site, please fill out our feedback form.
Last update: September 28, 2004