US consumers are paying the price for the tension in the Middle East in the shape of higher prices, forced upwards by soaring energy costs.

Figures released on Tuesday showed that consumer prices in the US were 0.3% higher in March than in February, making it the third straight month of rising prices.

With oil prices hovering above $25 a barrel as a result of Iraq's decision to turn off the taps in protest at Israel's invasion of Palestinian-held territory, energy prices were up 3.8%.

Stripping out that effect - and food prices, which can also be volatile - the rise in prices was just 0.1%.

Normally a strengthening of inflation in an economy is a trigger for the central bank to increase interest rates, which in the US have been at the historic low of 1.75% since December 2001.

But the gain was lower than many economists had expected, encouraging those who hope the Federal Reserve will leave it until later in 2002 to start reversing the 11 cuts made to help restart the economy last year.

Output accelerates

Few expect today's other main statistic to force the Fed's hand on interest rates either.

The Fed reported that industrial output rose 0.7% in March, the biggest one-month rise in two years, and that industry was using 75.4% of its capacity, up from 74.9% the month before.

The firmer than expected figures - again a rise for the third month in a row - suggests that US industry is getting back on track after the recession last year, when inventories rose to sky-high levels and companies held back production in order to clear their warehouses.

The widespread firings seen in the last three months of 2001 are slackening off, and the hours being worked are increasing.

Recovery beckons

Recent numbers have suggested that the US economy did not suffer quite as much as many feared during 2001.

Although recession started in March, according to the authoritative National Bureau of Economic Research, the economy grew 1.2% for the year as a whole, according to the Commerce Department

And in the fourth quarter - which was widely expected to see the US slow to a crawl in the wake of 11 September - early estimates of 0.2% growth were revised to a much more healthy 1.7%.