Productivity Report for Dec 21, 2024

Two metrics that measure commercial output and production are the Industrial Production Index, which measures the value of produced output, and Total Capacity Utilization (“TCU”), which measures the actual output of firms relative to what they can produce. These two metrics are tied to the Inventory-to-Sales Ratio. A drop in Production and TCU indicates that value of output is falling and firms are using a smaller percentage of their capital, meaning that firms are exhibiting but not taking advantage of increased productive capacity since the value of their goods is falling. (The opposite case indicates expansion of valuable goods.) Decreasing Production and TCU usually results in an increase in the Inventory to Sales ratio, suggesting that output is sitting longer in inventory. These three signs are indicators of a slowing economy as we saw as far back as 2018. In 2021, we are now seeing production expected to increase due to low interest rates, with TCU only now returning to its pre-pandemic levels, and Inventory-to-Sales stagnant as businesses carefully weigh production forecasts (given current labor issues) and domestic & global demand for products.

Industrial Production

Capacity Utilization

Inventory-to-Sales Ratio

Retail Sales incl. Food Service