August 20, 2024
US capacity utilization decreased to 77.8 in July from 78.4 in June. The indicator started to decline from its peak at 81.1 in April 2022 with the advent of monetary policy tightening and since then has been gradually decreasing to as low as 77.2 in January 2023 (see chart). During 2024 it stabilized around 78, however, with July reading it looks down again (see chart).
Decline in capacity utilization indicates producers reduce their output in reply to sluggish consumer demand which in its turn suffers from expensive credit. Shifting police-makers’ attitude to economic growth from inflation, which easing in line with expectations, may lead to acceleration of rate cuts in coming month. This will help to restore consumer confidence and give a boost to the economy.
⭐️Summary:
The capacity utilization dropped in July meaning producers still uncertain about consumer demand. Any signal the economy keeps slowing gives the Fed the reason to step up with policy easing to give it a boost.