US recovery gains strength

THE recovery of the US economy is gaining momentum as investors push stock prices higher and economic indicators indicate the business climate continues to improve.

Preliminary figures from the Michigan consumer sentiment survey came in above expectations, and US wholesale prices rose more than forecast in October, led by higher costs for food, cars and light trucks.

But US industrial production rose less than expected in October as auto-makers turned out fewer cars and trucks, the Federal Reserve said in Washington.

Prices paid to US factories, farmers and other producers, increased 0.8%, the biggest rise since March, following September’s 0.3% gain, the Labour Department said.

Excluding volatile food and energy prices, the so-called core rate rose 0.5%, also the largest since March, after rising 0.1% a month earlier.

The US economy expanded at the fastest pace in 19 years in the last quarter as consumer spending surged, while businesses added workers to their payrolls for a third month in October. Improving demand may be making it easier for firms to raise prices, some economists said.

However, US industrial production rose less than expected in October as car-makers turned out fewer cars and trucks, the Federal Reserve said.

The Fed’s gauge of work done at factories, mines and utilities rose 0.2% last month after increasing a revised 0.5% in September. The share of industrial capacity in use increased to 75% from 74.8%.

And US Federal Reserve policy makers have leeway to maintain the current level of interest rates in coming months because there is little inflation and excess industrial capacity, the president of the Federal Reserve Bank of Philadelphia Anthony Santomero said.

“Once the current expansion gains a firmer foothold, monetary policy must eventually be moved to a less stimulative and then neutral stance,” Mr Santomero said.