Consumer Prices, Factory Production Rise in April

U.S. factories were busier in April and consumer prices posted their sharpest rise in nearly a year, a sign the slack that hit the economy after Sept. 11 was lifting as the recovery gains traction.

The Federal Reserve said Wednesday that industrial production rose 0.4% in April, a fourth straight monthly gain that reflected a pickup in auto production.

Separately, the Labor Department reported that consumer prices increased a sharp 0.5% in April, the biggest gain since a matching rise in May of last year.

A hefty 10% rise in gasoline costs helped push the consumer price index up, but even excluding volatile food and energy prices, the CPI advanced 0.3%.

The Fed’s measure of the output of the nation’s factories, mines and utilities came largely in line with the expectations of Wall Street economists, but the CPI was a bit higher than most had forecast.

Still, analysts said it did not signal an outbreak of inflation and most investors stuck to bets the Fed would wait until August to raise interest rates from 40-year lows.

“If we see two more months like this of CPI exceeding expectations, then people will worry. But the Fed will hold off, because they want to see that the recovery is in place and solid,” S&P; Marketscope analyst Paul Cherney said.

With industrial output rising, the amount of production capacity in use by firms also rose slightly, to 75.5% in April from a revised 75.3% in March.

The report showed the continued, gradual recovery of the factory sector as it shakes off the effects of a sharp decline in output that started in late 2000.

April’s gain was aided by a 3.1% advance in automobile production, as car makers tried to keep pace with steady consumer demand. Excluding autos, industrial production would have grown a smaller 0.2%, the Fed said.

The factory sector saw output rise by 0.3%, its fourth straight increase; mining production gained 1.1%; and utilities output was up 0.9%, a rise some economists pinned to warm weather.

A third report showed businesses trimmed inventories for the 14th consecutive month in March.