Capacity utilization is the level of usage of the manufacturing facilities to produce goods.
Capacity utilization is measured on both micro and macro levels. Firms, industries, and economies use the value of capacity utilization as an indicator of economic trends, while economists watch capacity utilization figures to forecast the future levels of demand and inflation.
Capacity utilization figures can be calculated in different measures, such as volume, weight, or manhour.
Companies target higher levels of capacity utilization since increases in capacity utilization positively affects profitability.
Also see: idle capacity