The Federal Reserve reported that industrial output increased 0.9 percent in June, three times faster than the 0.3 percent rise in May. The good performance provided further evidence that the nation's factories, mines and utilities have rebounded from a spring slowdown.
Meanwhile, the Labor Department provided a second dose of good news on inflation, reporting that prices at the wholesale level were unchanged in June even though gasoline prices shot up at the fastest pace in eight months. On Thursday, the government reported that consumer prices were also frozen in June.
Taken together, the two reports showed an economy that was expanding at a solid pace with inflation well contained.
The 0.9 percent rise in industrial production was the best showing since a 1.1 percent increase in February 2004. More than half of the gain came from a 5.3 percent surge in utility output, reflecting warmer-than-usual temperatures in June. Utility production had been down in both May and April as unseasonably cool weather in many parts of the country had depressed demand for electricity to power air conditioning.
Manufacturing output was up a solid 0.4 percent in June following an even stronger 0.5 percent rise in May. Both gains had followed two months of declines which had raised concerns that the manufacturing sector, the hardest hit in the 2001 recession, could be faltering again.
Output at mines, a category that includes oil production, rose by 0.4 percent in June following a 0.2 percent May increase.
The good news on wholesale prices reported in the Labor Department's Producer Price Index occurred because a steep decline in food prices last month offset a big jump in the cost of energy. Outside of food and energy, prices were well-behaved with so-called core inflation falling by 0.1 percent, the first decline since February.
In a third report, the Commerce Department said business inventories rose a slight 0.1 percent in May as stockpiles of unsold cars at auto dealerships fell sharply. The small May increase followed a revised 0.2 percent rise in April inventories held at all levels of business.
The good news on wholesale prices followed a report Thursday that prices at the retail level were also unchanged in June. However, the report on consumer prices showed energy prices falling for a second consecutive month while the report on wholesale prices showed an increase in energy costs.
Analysts noted that the wholesale price report measures price pressures at an earlier point in the delivery chain before they reach the consumer. Therefore the PPI picked up a jump in energy costs that had not yet hit gasoline pumps.
Energy price pressures have increased even more since both the wholesale and retail price surveys were taken for June. Crude oil costs hit a record high above $61 per barrel in early July and gasoline pump prices rose last week to a nationwide average of $2.33 per gallon, up 10 cents from the previous week.
Those increases are expected to push inflation at both the wholesale and retail levels up in July.
For June, the rise in wholesale energy costs reflected an 8.7 percent jump in gasoline prices, the biggest increase since a 12.8 percent increase last October.
Food costs at the wholesale level fell 1.1 percent in June, the biggest drop in 11 months. The decline was led by an 8 percent drop in beef prices and a 7.7 percent fall in pork prices, the biggest one month drop in nearly seven years.
Outside of food and energy, the 0.1 percent drop in core inflation at the wholesale level reflected a 1 percent drop in the cost of new passenger cars and a 1.7 percent decline in prices for light trucks. Both decreases were attributed to automakers' decisions to bring back attractive incentive deals.