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Industrial production surged 0.7 percent in August in the 15th straight advance, the government said Friday, making another round of interest rate increases more likely.

The Federal Reserve also said output this spring and summer was greater than previously estimated.The increases are larger than analysts expected and suggest inflationary pressures in the economy are increasing more rapidly than anticipated.

Financial markets reacted negatively, with bond prices down sharply and the Dow Jones industrial average declining in early trading.

The August increase was the largest since March and was led by stepped-up automobile assemblies and gains in machinery, including computers, the Fed said.

The economy also was operating closer to capacity last month, the central bank said, up 0.4 percent to 84.7 percent. That matched the highest operating rate in more than five years.

Though the figures make higher interest rates more likely, analysts said in advance of the report they expected the Fed to wait until November before tightening credit for the sixth time this year.

The figures are closely watched by the Federal Reserve in its campaign to maintain price stability.

The Fed said production at the nation's factories, mines and utilities also rose a revised 0.3 percent in July and 0.5 percent in June. Both figures are 0.1 percent higher than earlier reports. In May, output was up 0.5 percent, revised from 0.3 percent.