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Operating Rate for Factories Rises to 80.8% : 3rd Straight Gain Seen as Good Sign for Economy

February 19, 1986|Associated Press

WASHINGTON — U.S. industry operated at 80.8% of capacity in January, the third consecutive increase but only a 0.1% improvement over December, the government said Tuesday.

The Federal Reserve Board said the increase in the operating rate at the nation's factories, mines and utilities was substantially smaller than the gains of 0.5 percentage point in November and 0.4 percentage point in December.

The operating rate, which fell in September and October, was generally weak during all of 1985 as American manufacturers were hobbled by strong foreign competition.

Analysts said they detected signs in the three months of gains that prospects are brightening for domestic manufacturers.

Declining Dollar

"The economy is starting to move ahead again," said Donald Ratajczak, director of economic forecasting at Georgia State University.

He credited the increase to the declining value of the dollar, which improves sales by domestic manufacturers, and a decision to rebuild depleted inventory levels.

Ratajczak said the operating rate was not yet at the level where companies would boost spending on new plants and equipment by a large margin, but he said capital spending at least is not likely to decline in 1986 as some had feared.

He predicted that the economy would grow this year at a pace very near the 4% being forecast by the Reagan Administration.

"We expect to see rather vigorous activity through the first half of the year with the second half still a question mark," he said.

Sharp Increase at Refineries

For January, the report on capacity utilization showed that manufacturers operated at 80.6% of capacity, up a slight 0.1 percentage point from December.

The operating rate at factories making durable goods--items expected to last three or more years--rose to 78.4%, up 0.2 percentage point, while the operating rate for non-durable goods remained unchanged at 84%.

The increase in manufacturing was led by a sharp 4.5-percentage-point jump in the operating rate at petroleum refineries. Other big gains were posted by automotive plants, which operated at 87.7% of capacity, up 2.8 percentage points from December, and steel mills and other primary metal manufacturers, who boosted production to 76.6% of capacity, a gain of 2.4 percentage points.

The operating rate at the nation's mines rose to 80.6%, a 0.9-percentage-point gain, which was the first increase in four months.

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