WASHINGTON -- Growth in industrial production slowed in April as automakers cut back on the pace of assembly lines for the second month in a row, the Federal Reserve Board reported yesterday.

Total output of factories, mines, and utilities grew 0.3% in April, following gains of 0.5% in each of the first three months of the year, the Fed said. It was the eleventh straight monthly advance in production.

Meanwhile, industrial companies operated at 83.6% of capacity in April, the highest level since June 1986, but unchanged from the March reading after a string of five straight monthly gains.

Economists said the report as a whole provided more encouraging news that inflation was not about to heat up, coming on the heels of two favorable inflation reports last week and the day before the Federal Open Market Committee is scheduled to meet. "I view this as good news for the bond market," said Thomas Carpenter, chief economist of ASB Capital Management in Washington, D.C.

Still, analysts expect that members of the FOMC will vote today to raise short-term interests rates for the fourth time in as many months, either by 25 or 50 basis points. The current federal funds rate is 3.75%.

Roger Altman, the Treasury Department's deputy secretary, yesterday signaled that the Clinton Administration continues to support the Fed's recent credit-tightening moves. "We don't have any quarrel with the Federal Reserve, with the way they're conducting monetary policy," Altman said at a conference sponsored by Institutional Investor.

"It's in our interest, of course, that the recovery be durable, rather than one which flames upward and flames out," Altman said. "And to the degree with which the tightening contributes, as I believe it will, to a longer lasting recovery, that's something which we want to see just as much as the Fed."

Analysts were encouraged that the capacity use rate stayed stable after a half year of gains, which, they said, indicates the economy did not take one step closer to production bottlenecks that can spur inflation. Also, they said that production of business capital goods remained strong, which helps productivity and increases total available capacity in the economy.

"It was nice to see continued strength in productivity-related products," said James Barkocy, domestic economist of Brown Brothers Harriman & Co. It was also a positive sign that production managed to grow without a corresponding gain in the operating rate, he said.

The Fed's report said manufacturing production grew 0.3% in April, following a huge 0.8% advance in March and a solid 0.6% increase in February. The April gain resulted from a 0.4% increase in durable goods output and a 0.3% gain in nondurables.

A decline in auto production played a major role in the slower rise in overall production, while output for most other industries continued to advance, the Fed said. Output of computers rose 1.2%, and industrial machinery and electrical equipment climbed about 1.5%.

The slowdown in the auto industry helped keep the overall factory operating rate unchanged at 83.6%. The operating rate for auto plants feel to 87.4% from 90.4% in March, which was down from a very high level of 94.4% in February. The rate for all manufacturing companies edged up to 83% from 82.9% in March.

Economists gave mixed reactions to the Fed's report regarding future growth. Many said they expected output to post smaller gains in the coming months compared to the robust advances during the last two quarters.

Irwin Kellner, chief economist of Chemical Banking Corp., said that with the big rise in business inventories in the first quarter, "output will grow rather slowly until those are worked down."

Yesterday's report had little effect on growth estimates for the second quarter, analysts said. Some economists said they expect the economy to find a new lower plateau of production that will be viewed as respectable. Meanwhile, others said the economy could begin to slow from here through the remainder of the year. Nonetheless, many analysts expect higher real growth this quarter than last.

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