Mine, Utility, Factory Operating Rate at 82% for 3rd Straight Month

The nation’s factories, mines and utilities operated at 82.4% of capacity in February, the third consecutive month the operating rate has been at that level, the Federal Reserve said Thursday.

Even though the February rate was the same as December and January, those two months were revised up slightly in the newest report, a fact that private economists said was encouraging.

“Slowly but surely, capacity utilization is marching higher, showing that the industrial sector remains strong,” said Allen Sinai, chief economist of the Boston Co.

Before the revision, the operating rate in December and January had been put at 82.2%.

The report said the February operating rate was held back by further cutbacks in production at auto plants and a big drop in coal production.

Before the year began, analysts expressed fears that the economy could weaken significantly due to widespread cutbacks in production as businesses tried to work off a huge supply of unsold goods that had been built up in the last part of 1987.

While high inventories have led to cuts in auto production, many other industries, such as textiles, chemicals and paper, have continued to have high operating rates.

Manufacturing Rebounds

Analysts have recently been boosting their forecasts for growth in the first quarter of 1988 based on a belief that the weakness from production cutbacks was overstated.

Manufacturing, which was in a virtual recession in 1985 and 1986 because of the country’s large trade deficit, began to rebound last year as the weaker dollar made American products competitive once again on overseas markets.

Continued strength in manufacturing this year is expected to be the principal force keeping the country out of a recession.

The 82.4% industrial operating rate is the highest overall since March, 1980. The operating rate plunged to 69.5% during the depths of the 1981-82 recession.

In February, the operating rate at manufacturing plants remained unchanged at 82.4% of capacity, reflecting an operating rate of 80.1% at factories making durable goods and a production rate of 85.9% of capacity at plants making non-durable goods.

Paper, a non-durable good, had the highest operating rate of any industry at 95.8% of capacity, with textile plants close behind at 91.9% and chemical plants at 86.5%.

Auto plants operated at 77% of capacity in February, down from 77.4% in January and a full 5 percentage points below the operating rate in October. Sales have rebounded in recent weeks and analysts believe that auto operating rates should start to move higher.

The mining industry operated at 80.6% of capacity in February, down from 81.1% in January. The decline was attributed to a drop in production at coal mines.

U.S. utilities operated at 82.2% of capacity last month, up from 81.7% in January.

The overall operating rate of 82.4% was more than 2 percentage points higher than the 79.7% operating rate in February, 1987.