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Low loans capacity utilization is good
Investors can also see low capacity utilization as good news since it means there is little near-term risk of demand getting ahead of supply, sparking inflation. And that means the Federal Reserve should not have to raise interest rates aggressively for quite some time. Large amounts of unused production capacity acts as a buffer that diminishes the inflation risks implicit to rising demand. The other clear sign of the high level of operating leverage in the US corporate sector is the jump in productivity.
Of course, for productivity increases and low capacity utilization to work through to corporate profits, business sales still need to pick up. Therefore, final demand has to increase. For the economy to really soar, businesses have to start spending on hiring workers, new technology and capital improvements. And usually will, once the evidence clearly shows that profits are perking up.