Sawmill and wood preservation firms reported lower capacity utilization rates coupled with level production and capacity throughout 2024. Utilization rates, however, have trended downwards since 2017 as sawmills have expanded production capability, despite no growth in production in 2024. Even with more production capability, real output has not followed as output remains lower than 2018.
According to Eye On Housing, Capacity utilization rates are a ratio of actual production and potential production capabilities for firms. The utilization rate for sawmills and wood preservations firms was 64.7% in the fourth quarter on a four-quarter moving average basis. As utilization rates have shifted lower, the gap between full production capability and actual production has grown. Actual production is typically lower than full capability due to multiple factors ranging from insufficient materials and orders to lack of labor.
By combining the Federal Reserve’s production index and the Census Bureau’s utilization rate, we can compose a rough index estimate of what the current production capacity is for U.S. sawmills and wood preservation firms. Shown below is a quarterly estimate of the production capacity index. This capacity index measures the real output if all firms were operating at their full capacity.
