As for why capacity utilization is important - some theory from David Mackie of JP Morgan:
"Capacity utilization plays a critical role in our thinking about the Euro area.
Given the lags in the production of the official output data, it influences our view of high frequency developments in production.
Because the denominator is influenced by the capital stock, the level of capacity utilization seems to play an important role in capital spending decisions.
It is a key determinant of pricing power and thus it is very significant in our Phillips curve for the region which drives our core inflation forecast.
And, last but not least, it plays an important role in our ECB forecasting tool, as it influences the appropriate policy rate."
However, it seems nobody cares what the underlying economic metrics are anywhere in the world anymore as long as the government is buying treasuries, mortgages, toxic assets, banks, oreos, California's IOUs and everything else... Bottom line is investors are convinced the only way to make money in this market is to keep front-running the Treasury and Fed until both of them hit double zero. Sphere: Related Content Print this post