US consumer prices rose only slightly last month as petrol costs increased more slowly. Overall, the figures showed that inflation remains mild.

The Labour Department said today that the consumer price index rose 0.2% in July after a 0.5% increase in June.

Petrol prices rose just 1% in July after jumping 6.3% in June. Excluding food and petrol costs, which are volatile, "core" prices also rose 0.2% in July.

Over the past 12 months, consumer prices have risen 2%. Core prices have increased 1.7% in the past 12 months, still below the Federal Reserve's 2% inflation target.

Slightly higher inflation could make it easier for the Fed to start pulling back on its low-interest-rate policies, while falling inflation would pressure the Fed to continue stimulating growth.

The Fed said after its July meeting that it planned to continue buying $85 billion a month in bonds to keep downward pressure on long-term interest rates. It also said it planned to maintain a key short-term rate near zero, where it has remained since December 2008 - at least as long as unemployment stays above 6.5%.

But chairman Ben Bernanke and several other Fed officials have said the bank could start slowing its bond purchases later this year. Some economists think such a change could be announced at the Fed's next meeting on September 17-18.

Most analysts expect the slowdown to be gradual. New bond purchases might not end until the middle of next year - and only then if the unemployment rate has dropped to around 7%.

Today's figures show that more expensive fruits and vegetables pushed up the price of food in July, which rose just 0.1%. Meat, chicken and fish also rose in price, while other food groups fell. Baked goods and cereals, milk and other dairy products, and fruit juices and other drinks all fell in price.

Core prices were pushed up by a big jump in clothing costs, which rose 0.6%, the third gain in a row. Rents and new car prices also rose, while airline fares fell 1.3% last month.

US economic growth is too slow and unemployment too high to spur much inflation. Hourly wages and incomes have barely grown since the recession ended four years ago, which makes it hard for retailers to raise prices.

The US economy grew at a scant annual rate of 0.1% in the October-December quarter and then at lacklustre annual rates of 1.1% in the first three months of this year and 1.7% in the April-June quarter.

But many economists think growth will accelerate to a 2.5% annual rate in the second half of this year as the effects of tax increases and government spending cuts begin to fade.

US manufacturing output slipped 0.1% in July

Output at US factories declined slightly in July, reflecting a drop in car production, new figures show. But the decline was expected to be temporary given the strong sales year car makers are having.

Manufacturing output edged down 0.1% in July compared with June, the Federal Reserve said today. It was the first drop since declines in March and April.

July's weakness reflected a 1.7% fall in the output of motor vehicles and parts, but that decline should be reversed in coming months as car makers ramp up production for the new model year.

Overall industrial production, which includes factories, mines and utilities, was flat in July after a 0.2% rise in June. A sharp 2.1% surge in mining was offset by a 2.1% drop in utility output.

Output in manufacturing, the most critical component of industrial production, is up a modest 1.3% from the level of a year ago.

Economists say manufacturing may have begun to emerge from a weak patch earlier this year.

For July, the output of construction supplies and defence and space equipment showed gains. But production of business equipment was unchanged, and the output of information processing equipment fell.

The 1.7% decline at car factories was the biggest drop since a 2.6% decline in January. Without the big fall in car and parts production, manufacturing output would have been unchanged in July.

The Fed report was weaker than an earlier report from the Institute for Supply Management. That report showed that US factories hired more workers and received a surge of new orders in July.

That activity had helped push the ISM manufacturing index to a reading of 55.4 in July, the highest point in two years and up from 50.9 in June. A reading above 50 indicates growth in manufacturing.