US factories gaining steam

US 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 US consumer sentiment and New York state manufacturing gains.Factory production increased 0.8 per cent in February after a revised 0.3 per cent decline the month before, the Federal Reserve said on Friday. Economists polled by Reuters had looked for a 0.4 per cent gain.The increase combined with a big rise in utilities’ output to lead overall industrial production up by 0.7 per cent, a good sign for first quarter economic growth.Separately, the Labour Department said its Consumer Price Index increased 0.7 per cent 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 per cent, leaving the door open for the Federal Reserve to press ahead with its bond-buying stimulus.Economists polled by Reuters had expected the CPI to advance 0.5 per cent. In the 12 months through February, it was up two per cent, the largest gain since October and an acceleration from January’s 1.6 per cent. Core prices, which strip out volatile food and energy costs, increased two per cent. While that was a also the largest increase since October, economists saw it as being within the Fed’s comfort zone.Policymakers at the central bank meet next week to assess the economy and are widely expected to keep purchasing $85 billion in bonds per month to spur even stronger economic growth. The Fed has said it would keep up asset purchases until it sees a substantial improvement in the labor market outlook.Gasoline prices rose 9.1 per cent last month, the largest gain since June 2009, after falling three per cent in January. Prices at the pump, however, have declined in the past two weeks.The pick up in inflation eroded household purchasing power, which could hurt spending. Average hourly earnings adjusted for inflation fell 0.6 per cent in February, and were up only 0.1 per cent compared with a year ago. source : khaleejtimes