U.S. industry operated at 81.3 percent of capacity in October, the highest rate in more than three years, the government said yesterday.
The operating rate at manufacturing plants alone climbed to 81.7 percent of capacity last month, the best showing since March 1980 and further evidence that U.S. producers are benefiting from higher export sales.
But analysts said the gains in operating rates did not change their belief that economic growth could 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 back on spending.
John Hagens, senior economist at WEFA Group, formerly Wharton Econometrics, said his forecasting firm had reduced its outlook for growth in the gross national product from 3.2 percent to 2.2 percent in 1988.
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.
In yesterday's report, 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 percent in September.
About two-thirds of the strength came from a sharp increase in operating rates in the auto industry. Car makers boosted production to 81.7 percent of capacity, the first time it has been above 80 percent since March.
The operating rate at auto plants had fallen to 74.8 percent in September as manufacturers cut back in an effort to reduce high inventories of unsold cars.
Economists said the high operating rates and falling interest rates may encourage businesses to expand capital investment plans. If this occurs, it would help to cushion the impact from the expected drop in consumer spending.
The October operating rate of 81.3 percent was the highest level since August 1984, when industry operated at 81.8 percent. 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 percent of capacity last month, compared with an average of 87.2 percent over the last two decades. This sector has been in a slump because of the sharp fall in world energy prices last year.
Utilities operated at 80.6 percent of capacity, the same as in September but down from an average 82.3 percent in the last 20 years.