U.S. Industry Operating at Highest Rate in 9 Years

U.S. industry operated at its highest rate in nine years last month, the government reported Wednesday, but analysts said the modest pace of growth should allay fears of increasing inflation.

Use of industrial capacity at factories, mines and utilities rose 0.1 percentage point to 84.2% last month, the highest rate since it hit 84.3% in November, 1979, the Federal Reserve said. The operating rate for November, 1988, was a revised 84.1%, and October’s figure was 84.0%.

In an accompanying report, the agency said industrial production climbed a moderate 0.3% in December following a revised increase of 0.4% in November.

While high operating rates can cause concern that factories will have trouble meeting demand, resulting in shortages and higher prices, economists said December’s increases were small enough that they didn’t point to higher inflation.

Lawrence Chimerine of the Wefa Group, consultants in Bala-Cynwyd, Pa., said the reports were “consistent with continued recovery in the industrial sector and moderate growth in the economy as a whole.”

“It’s probably the best of both worlds,” he said. “It showed continued expansion but at a moderate pace.”

Robert Brusca of Nikko Securities Co. International in New York said that while operating rates were high, the specter of inflation “doesn’t seem to be as much on our doorstep as some people have pretended.”

On the other hand, Brusca expressed concern that production “is not increasing fast enough to satisfy domestic demand and to make progress” on the U.S. trade deficit, which widened to $12.5 billion in November.