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Industry Operating at 81.3%--Highest Rate Since 1984

November 18, 1987|Associated Press

WASHINGTON — U.S. industry operated at 81.3% of capacity in October, the highest rate in more than three years, the government said Tuesday.

The Federal Reserve Board said the nation's factories, mines and utilities saw their operating rates climb 0.3 percentage point from a revised 81.0% in September.

About two-thirds of the strength came from a sharp increase in operating rates in the auto industry. Auto makers boosted production to 81.7% of capacity, the first time it has been above 80% since March.

The operating rate at auto plants had fallen to 74.8% in September as manufacturers cut back in an effort to reduce high inventories of unsold cars.

The overall operating rate at manufacturing plants climbed to 81.7% of capacity last month, the best showing since March, 1980, and further evidence that American producers are benefiting from higher export sales.

Analysts said the gains in operating rates did not change their belief that economic growth will slow substantially in coming months because of the adverse effects from the collapse of the stock market in October. Many economists have slashed their growth forecasts for next year in a belief that jittery consumers will cut spending.

John Hagens, senior economist at the WEFA Group, formerly Wharton Econometrics, said his forecasting firm had reduced its outlook for growth in the gross national product to 2.2% in 1988 from 3.2%.

He predicted that a backlog of unfilled orders placed before the stock market decline will keep industry operating at relatively high levels for the next three to four months.

Economists said the high operating rates and falling interest rates may encourage businesses to expand capital investment plans. If that occurs, it would help to cushion the impact from the expected drop in consumer spending.

High Point of Recovery

The October operating rate of 81.3% of capacity was the highest level since August, 1984, when industry operated at 81.8%. That was the high point for the current economic recovery. After that, soaring U.S. trade deficits caused by the high value of the dollar battered American manufacturers in 1985 and 1986.

The mining industry, which includes oil and gas production, operated at 78.9% of capacity last month, compared to an average of 87.2% over the last two decades. This sector has been in a slump because of the dramatic fall in world energy prices last year.

Utilities operated at 80.6% of capacity last month, the same as in September but down from an average of 82.3% over the last 20 years.

Manufacturers of durable goods such as autos operated at 79.2% of capacity in October, up sharply from the September rate of 78.4%, while producers of non-durable goods operated at 85.5% of capacity, unchanged from September.

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