The nation's factories continued to use up more of their excess capacity in January. The 79.9 percent factory utilization rate, reported by the Federal Reserve Thursday, represented only a slight increase from the 79.2 percent rate in December, but a significant gain from the previous January's 70 percent figure. The information is considered useful for short-term forecasting of business conditions and for estimating future profits.Skip to next paragraph
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The 20.1 percent of excess capacity also indicates that manufacturers are getting closer to the time when they must think about expansion. Although this would be good news for many people still out of work, most businesses would have to borrow to finance any expansion, putting additional upward pressure on the credit markets.
It should be noted, though, that factories can expand production without increasing capacity or employment, through overtime and subcontracting.