WRAPUP 4-U.S. production data points to sustained recovery

* Consumer prices rise 0.1 pct in Nov, below expectations

* Core CPI up 0.1 percent, first rise since July

* Industrial production rebounds 0.4 percent in November
(Updates markets to late afternoon)

By Lucia Mutikani

WASHINGTON, Dec 15 (BestGrowthStock) – U.S. industrial production
rose at its fastest pace in four months in November, implying a
self-sustaining recovery is now entrenched, but a mild gain in
consumer prices indicated still abundant slack in the economy.

Industrial output rebounded 0.4 percent, the Federal
Reserve said on Wednesday, the latest data to suggest the
recovery gained momentum in the fourth quarter.

However, with inflation barely rising, economists said the
pick-up in economic activity was insufficient to discourage the
Fed from completing its planned purchase of $600 billion in
government bonds to keep borrowing costs tamped down, and
weekly data showed mortgage applications fell on high rates.

“The economy is picking up momentum as we finish up the
year. But the improvement in data is not enough to stop the Fed
doing what they are doing,” said Neil Dutta, an economist at
Merrill Lynch Bank of America in New York.

The closely watched core Consumer Price Index, which
excludes food and energy costs, edged up 0.1 percent in
November, the first gain in three months, the Labor Department
said. Overall consumer prices inched up 0.1 percent, slowing
from a 0.2 percent rise in October.

The rise in core CPI matched economists’ expectations, but
CPI was below the 0.2 percent increase that had been forecast.

For graphics, click on:

U.S. consumer price inflation http://r.reuters.com/zam32r

U.S. CPI breakdown: http://r.reuters.com/gem32r

U.S. Industrial output, capacity utilization:


U.S. mortgages rates rise: http://r.reuters.com/raj32r

Prices for long-dated U.S. government debt (US30YT=RR: ) fell
sharply on the data, which saw investors pricing in higher
growth expectations.

The data and ratings agency Moody’s warning that it could
downgrade Spain’s debt helped to spark a U.S. dollar rally,
dragging stocks on Wall Street lower (.SPX: ). Moody’s warning
revived worries about the sovereign debt crisis in the euro


Utility output surged 1.9 percent last month and
manufacturing increased 0.3 percent, despite a steep drop in
vehicle production.

Continued strength in manufacturing, which has been the
star performer during the recovery, was underscored by a strong
rebound in a gauge of manufacturing in New York state in
December. For details see [ID:nN15127417].

Adding to the brightening economic picture, credit card
delinquency rates fell at major domestic lenders last month as
fewer consumers fell behind on bill payments. [ID:nN15127482]

Fed officials took little note of the improving tone of
economic data after a policy meeting on Tuesday, however, and
kept the spotlight on high unemployment and low inflation.

Economists parsing the latest report on consumer prices on
Wednesday said it was likely that a slowing in core inflation,
which had been troubling the Fed, had now run its course.

In the 12 months to November core CPI gained 0.8 percent,
edging up from October’s record low 0.6 percent but staying way
below the Fed’s comfort zone of 1.6 to 2.0 percent inflation.

“We have been expecting inflation to bottom out in the
fourth quarter, mostly driven by the end of falling shelter
costs. We are seeing some of that occurring,” said Troy Davig,
senior U.S. economist at Barclays Capital in New York.

Shelter costs edged up 0.1 percent in November, the second
consecutive month of gains as measures of rental costs moved
higher. Economists expect rental prices, which account for
about 40 percent of core CPI, to keep rising through 2011.

New vehicle prices slipped 0.4 percent in November,
extending the prior month’s fall. Prices for used cars and
trucks fell for a third straight month. Apparel rose 0.2
percent after falling for three straight months.

Despite signs of a pick-up in broader economic activity,
housing continues to lag. Applications for home loans dropped
last week as mortgage rates rose for a fifth consecutive week
to touch seven-month highs, the Mortgage Bankers Association
said. [ID:nNLLENE6PR]

Adding to the downbeat outlook for housing, home-builder
sentiment was mired at record lows in December, a National
Association of Home Builders/Wells Fargo survey showed.
(Additional reporting by Pedro Nicolaci da Costa and Corbett
Daly; Editing by James Dalgleish)

WRAPUP 4-U.S. production data points to sustained recovery