Upbeat data add to US recovery hopes

       US industrial production rose for a second straight month in August, reinforcing views the recession had ended, while a spike in gasoline costs pushed up inflation.
       A Federal Reserve report said industrial production increased 0.8% after gaining 1% in July.
       "Industrial production is one of the most important indicators when determining business cycle turning points."said Harm Bandholz, an economist at UniCredit Markets and Investment Banking in New York.
       Industrial activity last month was also boosted by auto manufacturing as the the "cash for clunkers" government programme, which provided incentives to buy new cars, spurred a jump in sales and prompted many automakers to ramp up output.
       There were gains in output in other segments. Analysts expect industrial output to maintain its upward trajectory for the remainder of this year, which could translate to companies lengthening workweek and raising wages.
       A separate report from the Labour Department showed the Consumer Price Index rose 0.4% last month after having been flat in July. Much of the advance came from a 9.1% rise in in gasoline prices. Gasoline costs dropped 0.8% in July.
       Compared to the same period last year, consumer prices declined 1.5% after falling 2.1% in July. Prices have been falling on an annual basis since March.
       "The steepest CPI declines are now behind us. Inflation is a potential threat,but for some way down the road, not today.
       "The Fed does not need to rush to tighten monetary policy," said Nigel Gault, chief US economist at IHS Global Insight in Lexington, Massachusetts.
       The Fed report on industrial production showed there was still a great deal of slack in the economy, allowing the US central bank to keep its benchmark interest rate near zero for a while.The Fed's policymaking committee meets next week.
       The Fed is expected to hold its benchmark overnight interest rate steady until the third quarter of next year, according to the Reuters poll.
       The capacity utilisation rate, a measure of slack in the economy, inched up to 69.6% but remained well below the 1972-to-2008 average of 80.9%, the report showed.
       On the inflation front, aside from rising energy costs, there was scant evidence of price pressures. Stripping out volatile energy and food prices, the core measure of consumer inflation rose 0.1%, match-ing increase in July.
       Prices for new vehicles fell 1.3%, the largest decline since October 1972, reflecting the incentives that gave discounts to buyers to trade in old gas-guzzling cars for new, fuel-efficient ones. The Labour Department said the programme,which ended in August, could affect CPI data into September.
       Compared to August last year, the core inflation rate rose 1.4%, the smallest rise since February 2004, after increasing 1.5% in July.
       A report from the Commerce Department showed the US current account deficit shrank in the second quarter to $98.8 billion, the lowest level since the fourth quarter of 2001.
       The deficit contracted from an upwardly revised $104.5 billion in the first quarter and compared with analysts'forecast for a second-quarter gap of $92.0 billion.