Industrial Production and Capacity Utilization: Historical Revision and Recent Developments

Abstract

The Board of Governors of the Federal Reserve System has completed a revision of its measures of output, capacity, and capacity utilization for the industrial sector. The primary feature of the revision is a new formulation for aggregating the indexes and utilization rates based on weights that are updated annually rather than every five years. The new formulation has been used to revise the output, capacity, and utilization rates back to 1977. It provides more accurate current estimates of developments in industrial production and capacity utilization and eliminates an earlier, small overstatement of the growth trends of production and capacity. The revised indexes of industrial production and capacity show slower growth, on average, than the earlier estimates while the cyclical patterns of the revised measures are practically the same as before. Both from 1977 to 1987 and from 1987 to 1996, total industrial output grew at an average pace of about 2.3 percent a year--about 1/4 percentage point less than previously estimated. The growth of industrial capacity was revised down nearly as much; consequently, the rate of total industrial capacity utilization was revised down only a fraction of a percentage point at the end of 1996. (Statistical Release G.17, "Industrial Production and Capacity Utilization.")