U.S. Industrial Output Surges 5.2% During ’87 : December Rise Slows to 0.2%; Auto Slump Cited

U.S. industrial output climbed 5.2% in 1987, almost five times the previous year’s gain and the best showing for American industry since 1984, the government reported Friday.

The Federal Reserve said production at American factories, mines and utilities edged up just 0.2% in December as widespread gains in many industries were offset by a sharp drop in the production of autos.

The December advance followed gains of 0.4% in November and 1.1% in October.

Even with the slower advance last month, the improvement for the year was 5.2%, the best yearly performance since a 6.2% rise in 1984.

Industrial production rose only 1.1% in 1986 following a 2.2% gain in 1985, two years when American manufacturers were battered by stiff foreign competition.

The big rebound last year, analysts said, was brought about by the weaker dollar, which has made American goods competitive once again on overseas markets.

In a separate report Friday, the Commerce Department said the nation’s trade deficit narrowed to $13.2 billion in November as U.S. exports surged to a record level of $23.8 billion.

Analysts said they expect further healthy increases in industrial production in the new year as American producers continue to benefit from the boom in exports.

“Our smokestack industries are coming back to life, mainly due to export demand,” said David Jones, an economist with Aubrey G. Lanston & Co., a government bond dealer in New York.

“This is the best year for American industry we have seen in some time,” said David Wyss, an economist with Data Resources Inc. of Lexington, Mass. “Manufacturing is now becoming the leading sector of the economy instead of the lagging sector.”

Many economists believe that strength from the industrial sector, bolstered by further gains in export sales, will allow the economy to survive the jolt delivered to consumer confidence by the Black Monday stock plunge last October.

The 0.2% December increase came about despite the fact that production in the auto industry slipped by 7.1% following a 2.9% drop in November. Auto makers scaled back production to an annual rate of 6.5 million cars in an effort to compensate for high inventories and lagging sales.

Economists predicted further weakness in this industry in the months ahead because of sluggish sales.

Overall, manufacturing production rose 0.2% to stand 5.3% ahead of where it was a year ago. All of the strength in December came from production of non-durable goods, which climbed 0.6%, offsetting a 0.1% drop in production of durable goods, the category that includes autos.