Weaker Dollar Helps Manufacturers : Operating Rate Rises to 81% of Capacity

The nation’s factories, mines and utilities operated at 81% of capacity in August, the highest level in almost three years, as manufacturers continued to benefit from a weaker dollar, the government reported Wednesday.

The Federal Reserve said the operating rate last month rose by 0.1 percentage point from a revised 80.9% level in July.

The July figure had previously been reported at 80.5%. The operating rates for May and June were revised upward as well, to 80% and 80.3%, respectively.

The operating rate has been climbing steadily for the past four months and is now at its highest level since a similar 81% operating rate in November, 1984.

Analysts said the gains provide further evidence of the strength in American manufacturing this year, where employment and production have climbed in reaction to a nearly 50% decline in the value of the dollar during the past two years.

The weaker dollar has made American products more competitive on overseas markets. This gain has not shown up in America’s monthly trade figures, which hit a record $16.5 billion deficit in July. The problem, analysts said, is that while export sales have risen, the weaker dollar has made the price of imports rise even faster.

When operating rates climb above 80%, some economists start to express concerns about possible bottlenecks and rising inflationary pressures.

But Michael Evans, head of a Washington forecasting firm, said he sees no evidence of price pressures building up from the higher operating rates. “We are in an entirely different ball game now with the foreign competition. People are simply not raising wages or prices,” he said.

The factory use report said auto makers cut back sharply on car production in August because of the high inventory levels. Car production fell to 61.6% of capacity from 69.4% in July.