Operating Rate for Factories Rises in April : But Revisions Show Less Activity in First Quarter

The U.S. industrial operating rate rose moderately to 83.9% in April, but factories remain under less strain than when the year began, the government said Monday.

Although the Federal Reserve Board’s report showed industry using more of its capacity last month, it revised its figures for the first three months of the year to show less activity than previously reported.

“This fits in with the general pattern of slowness,” said Lyle Gramley, chief economist at the Mortgage Bankers Assn. of America.

The capacity rate hit its most recent peak of 84.3% in December--a 10-year high. “The report shows relatively sluggish growth, but continued growth,” said economist David Wyss of Data Resources Inc., a Lexington, Mass., consulting firm. “That’s what you want to see at this stage of the (business) cycle.”

Economists had been concerned that the steady upward march of the rate through last year signaled intensified inflationary pressures. A year ago, the rate was 82.7%. Economists say an 85% rate clearly signals a pickup in inflation.

As operating rates near capacity, factories find it difficult to produce enough to meet demand. That, in turn, can lead to shortages and price increases.

Since March, 1987, the central bank has been trying to ease inflationary pressures by raising interest rates. Monday’s report is the latest in a series of government statistics indicating that the strategy appears to be working, particularly in housing, which is sensitive to interest rate fluctuations.

At manufacturing plants, the operating rate rose a slight 0.1 percentage point to 84%--0.7 percentage points lower than in January.

The rate at factories producing durable goods, “big ticket” items expected to last three or more years, rose to 82.6% in April from 82.4%, reflecting increases at auto plants, aerospace manufacturers and both electrical and non-electrical machinery factories.

At plants manufacturing non-durable goods, the rate edged up to 86.2% last month from 86.1%.

In a second report Monday, the Federal Reserve said the pace of industrial production rose 0.4% in April after holding steady in March and falling 0.3% in February, the first decline in a year.

The Fed’s industrial production index stood at 141.1% of its 1977 base, 4.2% higher than a year ago.