Chart of the Week: Earnings vs. Capacity Utilization
Since 1970, changes in the Capacity Utilization Rate have correlated well with Corporate Earnings. In the past, capacity utilization bottomed (or peaked) 6 to 15 months before earnings. Not so during the present recovery: Profits soared while capacity utilization remains at a relatively low 76.6%.
Earnings vs. Capacity Utilization
Source: ChartoftheDay
Two possible explanations: US companies are outsourcing to low cost countries, driving profits at the expense of US manufacturers. Some finger “quality of earnings” as the culprit, as they were during a similar divergence in 1999-2000.
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“I am glad that I paid so little attention to good advice; had I abided by it I might have been saved from my most valuable mistakes.”
-Gene Fowler (1890-1960)
Thursday, March 18, 2004 | 11:52 AM | Permalink
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The key is there is no pressure from labor costs and there is fine productivity. So, you get fine earnings. We need a better return to labor.
Posted by: anne | Mar 18, 2004 5:41:24 PM
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