Reports Point to Speed-Up of Growth in U.S. Economy

U.S. businesses ran at their fastest operating rate in more than 2 1/2 years in September while new-home building climbed sharply in renewed signs of economic vigor, separate reports on Friday showed.

The Federal Reserve Board said production by the nation’s factories, mines and utilities gained 0.7% last month--more than double the 0.3% gain anticipated by Wall Street economists--pushing the capacity use rate up to 84.4% from 84.1% in August.

That was the fastest operating rate since 84.5% in February 1995.

Earlier, the Commerce Department said construction of new homes and apartments rebounded last month by an unexpectedly steep 7.9% to a seasonally adjusted annual rate of 1.50 million in September. That followed revised drops of 5.1% in August and 2.5% in July.

Economist Hugh Johnson of First Albany Bank in Albany, N.Y., said the two reports showed an indisputably strong economy.

“They’re disturbing because I had begun to believe the economy was slowing in September,” Johnson said, adding the reports likely would spark a vigorous debate at the Fed about tightening monetary policy.

The Fed’s policy-setting Federal Open Market Committee will hold it’s next meeting on Nov. 12.

Analysts have said the central bank, while openly expressing its concern about potential inflation, likely needs to see clear evidence of it before taking dampening action through stiffer interest rates.

September new-home building increased in every region of the country. Applications for new building permits also climbed sharply, suggesting a healthy level of construction activity ahead.

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Housing Starts

Seasonally adjusted annual rate, millions of units:

Sept. ‘97: 150

Source: Commerce Department

Industrial Production

Index: 1987= 100; seasonally adjusted

Sept. ‘97: 122.4

Source: Federal Reserve Board