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American industry registers gain, signals strong economy

Nov. 18, 1997

The Associated Press

The nation's industrial output advanced solidly in October, propelled by broad-based gains in computers, industrial machinery and a variety of consumer goods.

Production at the nation's factories, mines and utilities rose 0.5 percent, the same as in September, pushing the industrial operating rate to 84.3 percent of capacity, the highest level since March 1995, the Federal Reserve said Monday.

'Manufacturing is moving ahead across the board, indicating economic strength that is well-integrated and broad-based,' said Jerry Jasinowski, president of the National Association of Manufac-turers.

Still, the inflation-sensitive bond market found the report reassuring because it was a shade less robust than expected. The Dow Jones industrial average of 30 stocks rose 125.74 points, or 1.7 percent, to 7,698.22.

The industrial operating rate reached a level that has signaled inflationary bottlenecks in the past, but price pressures still are scarce. That's because U.S. capacity isn't strained in every industry and, where it is, such as the steel industry, often there's plenty of worldwide capacity, said economist Ken Mayland of KeyCorp in Cleve-land.

'If you look at certain very visible industries, such as autos, textiles and apparel, chemicals, you see the utilization rates are well below previous peak levels,' he said.

Plus, analysts are predicting manufacturing growth will slacken next year as consumers start to spend less vigorously and export sales to Asia drop. Production already is somewhat outstripping demand, leading to a buildup of goods on shelves and back lots, said economist Gerald D. Cohen of Merrill Lynch.

'Inventory accumulation in the industrial sector was very strong in the first three quarters of the year. Therefore, we anticipate that production gains will slow in the months ahead,' he said.

The October strength in industry was widespread except at mines and oil wells, where output fell 1.1 percent, pulled down by declines in production of crude oil and coal.

Manufacturing rose 0.6 percent, triple the modest 0.2 percent gain in September. Light-truck production rose strongly, offsetting a drop in autos. Production of computers and office equipment increased 2.5 percent.

Strong gains also were recorded for appliances and electronics, industrial machinery, semiconductors, carpeting and furniture, paper products and tobacco.

Production at utilities rose 0.3 percent, on top of a 3.5 percent surge in September.

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