Economists consider an 85 percent capacity utilization rate the point at which factories have trouble keeping up with orders, causing bottlenecks that can set off an upward inflationary spiral.
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Adding to the gloomy mood, Hu also said UMC's production capacity utilization rate would drop to 70 percent in the fourth quarter, compared to 94 percent in the third.
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Moreover, companies cannot increase their output of goods and services, as measured by the so-called capacity utilization rate, because it has reached a very high 84.9 percent in October.
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Moreover, companies cannot increase their output of goods and services, as measured by the so-called capacity utilization rate, because it has reached a very high 84 . 9 percent in October.
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As a result, the capacity utilization rate fell slightly in September, to 83 . 3 percent from 83 . 4 percent, well below the level where inflationary bottlenecks start pushing prices up.
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Even more important from a forecaster's point of view, the capacity utilization rate-- the resources available to produce goods-- reached 84.1 percent in March, according to a report from the Fed's own research staff.
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But Matthew Alexy, chief market strategist at CS First Boston, said that factories in general remained a long way from reaching capacity utilization rates normally associated with inflation fears, which would hurt the bond market.
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"The capacity utilization rate in the manufacturing sector remains a reliable indicator of inflationary pressures, " a study by C . Alan Garner concluded in the current Economic Review published by the Kansas City Fed.
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"The market's greatest fears were realized when they learned that Meyer is truly concerned about the strength of the U . S . labor markets and the recent rise in the manufacturing capacity utilization rates,"
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"The rapid pace of capital investment has helped lower capacity utilization rates " and thus reduced inflationary pressures this year, said analysts at Raymond James & Associates in St . Petersburg, Florida, before the report's release.