U.S. Manufacturing Capacity Remains Low

By John S. McClenahen A string of positive economic data lately may leave you with the impression that U.S. factories are booming as the economy recovers from its most recent recession. Not so. The capacity utilization rate in manufacturing was just 73.2% in February, show the most recent U.S. Federal Reserve data. And while he's assuming that industrial production will row at a 7% annual rate between now and the end of the year, "that would still leave the capacity utilization rate under 77% by the end of 2002," notes Bruce Steinberg, chief economist at Merrill Lynch & Co., New York. In contrast, during the 1990-91 recession, U.S. factories never fell below 77.1% of capacity.

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