U.S. Manufacturing Capacity Utilization: Manufacturing capacity utilization (MCU), scored a 75.1% in January, down 0.1% month on month (m/m), and down 2.1% year on year (y/y)

Figure 1 charts capacity utilization from 2009 to present. The MCU index is currently in the green zone which is considered to be ideal. After a long run at the bottom of the “green zone”, the index has begun to move higher scoring its third month in a row above 75%.

An Institute for Supply Management respondent stated, “Our business is starting 2020 stronger than we finished 2019, as we saw a dramatic downturn in orders over the last four months of 2019. Orders are up to start the year, but slightly behind where they were one year ago.” (Fabricated Metal Products)

The Institute of Supply Management’s Index moved up 3.1 points on month, (m/m) to 50.9 for January 2020. This is the first time the index has been higher than 50 since July 2019.  Before this month, the index had been lower than 50, (>50 = expansion) for five consecutive months. The new orders sub-index scored a 52.0. Overall, the ISM manufacturing index is strengthening.

Of the 18 manufacturing industries, eight reported growth in January — listed in order — are: Furniture & Related Products; Wood Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Chemical Products; and Fabricated Metal Products. The eight industries reporting contraction in January — listed in order — are: Printing & Related Support Activities; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Textile Mills; Transportation Equipment; Primary Metals; and Machinery.

At Gerdau we regularly monitor the manufacturing capacity utilization date issued by the Federal Reserve because it provides excellent insight into the health of US manufacturing activity. We know that when manufacturing is performing well, so are steel sales and want to keep you our valued customers and readers informed.