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Estimating capacity utilization from survey data

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In this paper, we review the history and concepts behind the Federal Reserve's measures of capacity and capacity utilization, summarize the methods used to construct the measures, and describe the principal source data for these measures--the Census Bureau's Survey of Plant Capacity. We show that the aggregate manufacturing utilization rate from the Survey of Plant Capacity does not exhibit the \"cyclical bias\" possessed by utilization rates from the less statistically rigorous utilization rate surveys previously used to estimate the Federal Reserve's measures. At the detailed industry level, utilization rates from the Survey of Plant Capacity for several industries do appear to possess a cyclical bias, but we demonstrate that this bias is removed in the construction of the Federal Reserve capacity measures. We further show that the Federal Reserve measures, by combining the Census survey utilization rates with other indicators of capacity, do not discard significant information contained in the Census rates. In fact, the Federal Reserve procedures add to the predictive content of the Census utilization rates in models of capital spending, capacity expansion, and changes in price inflation.

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  • Norman J. Morin & John J. Stevens, 2004. "Estimating capacity utilization from survey data," Finance and Economics Discussion Series 2004-49, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2004-49
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    References listed on IDEAS

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    1. anonymous, 1976. "New estimates of capacity utilization: manufacturing and materials," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Nov, pages 892-905.
    2. Carol Corrado & Charles Gilbert & Richard D. Raddock, 1997. "Industrial production and capacity utilization: historical revision and recent developments," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 83(Feb), pages 67-92, February.
    3. Matthew D. Shapiro, 1996. "Macroeconomic Implications of Variation in the Workweek of Capital," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 79-134.
    4. George L. Perry, 1973. "Capacity in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 701-742.
    5. Richard D. Raddock, 1990. "Recent developments in industrial capacity and utilization," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 411-435.
    6. Frank De Leeuw, 1979. "Why capacity utilization rates differ," Staff Studies 105, Board of Governors of the Federal Reserve System (U.S.).
    7. Carol Corrado & Joe Mattey, 1997. "Capacity Utilization," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 151-167, Winter.
    8. J. Beaulieu & Joe Mattey, 1998. "The Workweek of Capital and Capital Utilization in Manufacturing," Journal of Productivity Analysis, Springer, vol. 10(2), pages 199-223, October.
    9. Lawrence R. Forest, 1979. "Capacity utilization: concepts and measurement," Staff Studies 105, Board of Governors of the Federal Reserve System (U.S.).
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    1. Norman Morin & John J Stevens, 2005. "Diverging Measures of Capacity Utilization: An Explanation," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 40(4), pages 46-54, October.
    2. Michalis Nikiforos, 2012. "On the Utilization Controversy: A Theoretical and Empirical Discussion of the Kaleckian Model of Growth and Distribution," Economics Working Paper Archive wp_739, Levy Economics Institute.
    3. Lefteris Tsoulfidis & Theologos Dergiades, 2007. "Estimating Capacity Utilization Using a SVAR Model: An Application to the US and Canadian Economies," Economics Bulletin, AccessEcon, vol. 5(4), pages 1-12.
    4. Pascal Michaillat & Emmanuel Saez, 2015. "Aggregate Demand, Idle Time, and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 130(2), pages 507-569.
    5. Boehm, Christoph E. & Pandalai-Nayar, Nitya, 2020. "Convex supply curves," Working Paper Series 2460, European Central Bank.
    6. Theologos Dergiades & Lefteris Tsoulfidis, 2007. "A New Method For The Estimation Of Capacity Utilization: Theory And Empirical Evidence From 14 Eu Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 59(4), pages 361-381, October.
    7. Nienke Oomes & Oksana Dynnikova, 2006. "The Utilization-Adjusted Output Gap; Is the Russian Economy Overheating?," IMF Working Papers 2006/068, International Monetary Fund.
    8. repec:ebl:ecbull:v:5:y:2007:i:4:p:1-12 is not listed on IDEAS

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    Keywords

    Industrial capacity; Statistical methods;

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