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U.S. Plants Run at Fastest Pace Since Mid-1984

December 16, 1987|Associated Press

WASHINGTON — U.S. factories, mines and utilities operated at 81.7% of capacity in November, the fastest pace since mid-1984, the government said Tuesday.

The Federal Reserve said the operating rate climbed from 81.5% in October and was up 2 full percentage points from a year ago.

Analysts said the gain reflected the success American manufacturers have enjoyed this year in boosting overseas sales after two years of being battered by foreign competition. In 1985 and 1986, operating rates slumped as U.S. firms were forced to cut back on production and lay off workers.

But some economists expressed concerns that the November figure, which was the highest operating rate since 81.8% in August, 1984, could be the highest for some time if American consumers begin to cut back on purchases because of fears growing out of the collapse of stock prices in October.

Michael Evans, head of a Washington forecasting firm, said that while economic activity has been strong in recent months, much of the production has been going into a backlog of inventories rather than final sales.

Evans said he believed that the country would enter a recession early next year as production is cut back sharply in order to work down unwanted levels of inventories.

"These production figures represent a buildup in inventories rather than reflecting any underlying strength to the economy," he said.

But other economists argue that inventory levels, while higher than a year ago, are still showing no signs of getting out of control. They said as long as consumer spending does not falter the country should be able to avoid a recession next year.

American manufacturing plants operated at 82% of capacity in November, up from 81.8% in October. This included an operating rate of 79.9% at factories making durable goods, items expected to last three or more years, and an even higher rate of 85.1% at factories making non-durable goods.

Sizable increases occurred in the metals and machinery industries last month. These gains were offset in part by declines in operating rates at plants producing motor vehicles and at petroleum refineries. Auto plants operated at 70.2% of capacity in November, down from 72.5% of capacity in October.

The operating rate at steel mills and other primary metal manufacturers has soared by 16% over the past 12 months, climbing to 87.9% in November. Analysts said much of the increase reflected an increase in production of aluminum and copper.

Operating rates at factories producing chemical and non-electrical machinery have also shown sizable increases during the past year.

The operating rate at textile mills has been above 90% since April, currently standing at 93%.

The operating rate in the mining sector, which includes oil and gas well drilling, was unchanged in November at 79.2% of capacity. The operating rate at the nation's gas and electric utilities climbed to 82% in November, up from 81.6% in October.

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