U.S. industrial production rose for a second straight month in August, reinforcing views the nation's recession had ended, while a spike in gasoline costs pushed consumer prices higher.
A separate report showed confidence among U.S. homebuilders this month vaulted to its highest level since May 2008.
The Federal Reserve said on Wednesday that output at the nation's factories, mines and utilities increased 0.8 percent last month after gaining 1 percent in July. The data came a day after Fed Chairman Ben Bernanke said the economic slump that started in December 2007 was very likely over.
A Reuters survey of economists forecast solid U.S. economic growth in the current quarter after four quarters of decline. It put growth at a 3 percent annual rate, up from the 2.4 percent pace predicted in an August survey.
The nascent recovery from the deepest downturn since the 1930s is being driven by factories ramping up production as businesses seek to rebuild depleted inventories.
Industrial production is one of the most important indicators when determining business cycle turning points. The official end of the recession will be dated as August, predicted Harm Bandholz, an economist at UniCredit Markets and Investment Banking in New York.
The private-sector group that dates recessions often takes months to make determinations.
The bullish data, coming on the heels of strong retail sales figures on Tuesday, propelled U.S. stocks to fresh 2009 highs. The blue chip Dow Jones industrial average gained 108.30 points at 9,791.71. The Standard & Poor's 500 Index was up 16.13 points at 1,068.76.
The improved confidence among homebuilders was further evidence that the housing market was stabilizing, even though mortgage applications fell last week. It has been supported by the government's tax credit for first-time buyers.
White House economic advisers were looking at the tax incentive and would make a recommendation to President Barack Obama as he considers whether to extend it, White House spokesman Robert Gibbs said.
Industrial activity last month was boosted by auto manufacturing as the government's cash for clunkers program, which provided a discount to buy new vehicles, spurred a jump in sales and prompted many automakers to ramp up output.
But mining production also rose and utility output jumped a sharp 1.9 percent as temperatures swung from an unseasonably mild July to a warmer-than-usual August, the Fed said.
CORE PRICES SUBDUED
A separate report from the Labor Department showed the Consumer Price Index rose 0.4 percent last month after having been flat in July. Much of the advance came from a 9.1 percent rise in gasoline prices.
Compared with the same period last year, consumer prices were down 1.5 percent after falling 2.1 percent in the 12 months through July. Prices have been falling on a year-on-year basis since March, though the size of the declines is shrinking.
The steepest CPI declines are now behind us. Inflation is a potential threat, but for some way down the road, not today, said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
The industrial output report showed there was still a lot of slack in the economy, with industrial capacity in use inching up to 69.6 percent from 69.0 in July -- still well below the long-run average of 80.9 percent.
The Fed's policy-making committee meets next week and debate is likely to center on a strategy to withdraw the extraordinary support the central bank is providing the economy.
With a great deal of slack in both the industrial sector and the labor market, the U.S. central bank should be able to keep benchmark interest rates near zero percent for a while. The Reuters survey predicted the Fed would hold benchmark overnight rates steady until the third quarter of next year.
Aside from rising energy costs, there was scant evidence of price pressures in August. Stripping out volatile energy and food prices, the core measure of consumer inflation rose 0.1 percent, matching July's increase.
Prices for new vehicles fell 1.3 percent, the largest decline since October 1972, reflecting the incentives of the cash for clunkers program, which the Labor Department said could affect CPI data into September.
Compared with August last year, the core inflation rate rose 1.4 percent, the smallest rise since February 2004, after increasing 1.5 percent in July.
(Additional reporting by Emily Kaiser in Washington; Editing by Dan Grebler)