Factory output rebounds, gasoline leads CPI higher

Fri Mar 15, 2013 10:07am EDT
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By Lucia Mutikani

WASHINGTON (Reuters) - Manufacturing output bounced back in February, the latest signal of strength in an economy that is showing clear momentum after a near-stall at the end of last year.

Other reports on Friday showed the biggest increase in consumer prices in nearly four years last month as the cost of gasoline surged and a tempering in March of consumer sentiment and New York state manufacturing gains.

Factory production increased 0.8 percent in February after a revised 0.3 percent decline the month before, the Federal Reserve said on Friday. Economists polled by Reuters had looked for a 0.4 percent gain.

The increase combined with a big rise in utilities' output to lead overall industrial production up by 0.7 percent, a good sign for first quarter economic growth.

Separately, the Labor Department said its Consumer Price Index increased 0.7 percent last month, the largest gain since June 2009, after being flat in January.

Gasoline accounted for about three quarters of the spike in consumer inflation, and so-called core prices advanced just 0.2 percent, leaving the door open for the Federal Reserve to press ahead with its bond-buying stimulus.

"The way the data has been playing out it gives them a free hand to be extremely aggressive to bring down unemployment," said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut.

Economists polled by Reuters had expected the CPI to advance 0.5 percent. In the 12 months through February, it was up 2 percent, the largest gain since October and an acceleration from January's 1.6 percent.   Continued...

Tasha heads to checkout at a Walmart Store in Chicago, November 23, 2012. REUTERS/John Gress