Car sales drive up US output figures

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A HIGHER increase than expected in US industrial production was yesterday taken as confirmation that the American economy is accelerating and may hit an annual growth rate of 4 per cent or more in the final quarter of the year.

Lifted by increased production of cars, industrial production advanced by 0.8 per cent in October, while September's rate of increase was revised upwards to show a 0.4 per cent rise. Following last week's disclosure of a 1.5 per cent surge in US retail sales in October, many analysts are upgrading their fourth-quarter growth forecasts.

Car production is being boosted by strong demand from consumers, who are being tempted by cheap credit facilities to replace old models. There is also evidence of price discounting, which makes US-produced cars more attractive than foreign models. Japanese car imports have been hit by the sharp rise

in the yen against the dollar. In another sign of faster economic expansion, industrial capacity use rose in October to 82.4 from 81.9 per cent in September - the highest figure since August 1990. A range of 83- 86 per cent is generally regarded as signalling building inflation pressures, but analysts said there were no indications yet that inflation posed a threat.

Although the latest US inflation figures suggest that the current expansion is relatively inflation-free, some analysts believe the Federal Reserve may tighten credit in the first quarter of next year.

Fourth-quarter growth will also be boosted by higher farm inventories, which are expected to recover from the impact of heavy flooding in the US this summer.