Both officials and commentators concerned with demand management need up-to-date indicators of the pressure of demand on economic resources. Statistics on the supply of and demand for labour have been compiled for many years. The unemployment figures, which are available monthly and promptly, have long been regarded as a measure of the pressure of demand for labour and, more recently, the adult vacancies series has been preferred for the same purpose. The strength of demand for the other main factor of production - capital - has been relatively neglected, however, because of the problems of measurement and consequent paucity of statistics. The Confederation of British Industry publishes the results of a sample survey indicating the proportion of firms working below full capacity, but there is no directly observed measure of how much of the capital stock is in use at any time. In an attempt to remedy this situation, an index of capital utilisation in manufacturing industry has been developed in the Bank. It was referred toin the last issue of the Bank's annual Report and accounts. The first section of this article describes the assumptions made and the general method used in constructing the capital utilisation index; the second section explains the calculation in greater detail; and the third section attempts to relate the index to other measures of the pressure of demand.
Capital utilisation in manufacturing industry