Industrial Output Increases for Sixth Straight Month
The nation’s industries boosted production in November for the sixth straight month, leading some analysts to predict that economic activity will continue to accelerate into next year.
Although some voiced fear of inflation, others cited various restraints they believe will moderate the pace of price hikes.
“In some sense, we have a lot of unusual conditions that will tend to limit how much prices will increase, but inevitably they will go higher,” said David Jones, an economist with Aubrey G. Lanston & Co., a New York government securities dealer.
The Federal Reserve Board reported Wednesday that industrial production shot up 0.9%, the biggest jump since an identical advance in November, 1992.
“The growth in recent months has been led by sharp increases in the motor vehicles and parts industry, where the level of production rose 20% between August and November,” the report says.
“Excluding motor vehicles and parts, industrial production grew 0.5% in November, with solid gains in the output of construction supplies and information processing equipment,” it says.
“This is confirmation of an acceleration in economic activity that is likely to continue into early 1994,” Jones said.
But the Fed reported that the growth was accompanied by a jump in the operating rate of industries, to 83% from 82.4% in October. In the past, a rate over 85% often raised price pressures because it resulted in production bottlenecks that prevented output from meeting demand.
“But that old rule of thumb was associated with the premise that the U.S. economy was a closed one,” said Evelina Tainer of Prime Economic Consulting in Chicago. “Now we have to look at the worldwide situation,” including recessions in Japan and much of Europe, “that alleviates price pressures internationally.”
Lynn Reaser of First Interstate Bancorp in Los Angeles cited domestic restraints that will probably cause output to slow next year, including impending tax increases and the effects of a health care overhaul.
Industrial Production, Source: Federal Reserve Board
