Constructing an Aggregate ifo Capacity Utilisation

Aggregate capacity utilisation is a key indicator in economic analysis. It describes the degree of usage of an economy’s production plants. In many economic theories an economy’s capacity utilisation also plays an important role. Overburdened capacities point to a growing need for investment. Finally, capacity utilisation is used to determine the trend rate of technical progress as part of the EU Commission’s potential assessment. Moreover, official statistics do not collect any data on capacity utilization, which is why survey data are usually used. In Germany the company surveys conducted by the ifo Institute are the benchmark. In practice capacity utilisation in manufacturing is most frequently used. It would, however, be good to have an aggregate capacity utilization figure that particularly takes the service sector into account. In this article an aggregate capacity utilisation measure is constructed based on the ifo Institute’s business surveys. It indicates that Germany’s economy has been on an upswing since 2013, given that the degree of capacity utilisation is constantly rising. Moreover, production capacity utilisation levels are now above average.