P. M. BRIEFING : Factory Operating Rate Dips 0.2% 2nd Month, Cools Inflation Fears

The operating rate for U.S. factories declined for the second consecutive month in March to 84%, the first back-to-back drop in nearly three years and a clear sign that the economy is cooling, the government said today.

The Federal Reserve Board said the March operating rate was 0.2 percentage points lower than February’s 84.2% level and 0.4 of a percentage point below the January level of 84.4%, which was the highest in nearly a decade.

February and March represented the first consecutive declines since August-September, 1986.

The closer factories get to full capacity, the greater the fear they will have trouble producing enough goods to meet demand, leading to shortages and price increases.

Today’s report is likely to ease somewhat economists’ worries that a substantial pickup in inflation is ahead. Analysts generally consider an operating rate of 85% to indicate inflationary pressures.