US factory output posted its sharpest increase in nearly a year in November as auto production staged a rebound.

It came in a month when consumer prices slipped.

Both are welcome signs for the struggling economic recovery.

Meanwhile, a separate report suggested the manufacturing strength continued into December with activity hitting an eight-month high.

The data offered hope that a factory slowdown that had weighed on the economy was abating, while the drop in consumer prices provided ample scope for the Federal Reserve to continue to support the recovery.

The Fed said manufacturing output rose 1.1% in November, the biggest gain since December 2011 and a rebound from a 1% drop in the previous month.

It said production was lifted by a sharp rise in motor vehicle output.

Separately, financial information firm Markit said its preliminary gauge of factory activity in December rose to 54.2, its highest level since April, from 52.8 in November.

Superstorm Sandy had weighed on overall industrial output during that month, but the snapback in November was stronger than economists had expected.

Petrol prices drop

A steep fall in petrol costs pushed down a measure of US consumer prices last month, keeping inflation mild.

The seasonally adjusted consumer price index dropped 0.3% in November from October, the Labor Department said today.

Petrol prices fell 7.4%, the biggest drop in nearly four years. That offset a 0.2% rise in food prices. In the past year, consumer prices have risen 1.8%, down from October's 12-month increase of 2.2%.

Excluding the volatile food and petrol categories, prices rose 0.1% in November. Core prices have risen 1.9% in the past year - below the Fed's annual target of 2%.

Higher rents, airline fares and new cars pushed up core prices last month, while the cost of clothing and used cars fell.

High unemployment and slow wage growth have made US businesses reluctant to raise prices. Many worry higher prices could drive away customers and that has helped to keep inflation tame. Modest inflation leaves consumers with more money to spend, which can boost economic growth.

Lower inflation also makes it easier for the Fed to continue with its efforts to rekindle the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.