Definition:
Along with productivity, the Fed attempts to calculate capacity utilization or essentially the percentage of capacity being used in our plants across different industries to gauge the strength of the economy. The Fed has a normal capacity target which they use as a benchmark. Socioeconomic and political forces can cause capacity utilization to fluctuate. Capacity generally fluctuates between 70% and 90% with 70% being recessionary and 90% indicating an expanding manufacturing sector and possible inflation.

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