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Strong U.S. data bolsters second-quarter growth prospects

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The fresh produce section is seen at a Walmart Supercenter in Rogers, Arkansas June 6, 2013. REUTERS/Rick Wilking

WASHINGTON (Reuters) - U.S. consumer prices recorded their biggest increase in more than three years in April as gasoline and rents rose, pointing to a steady inflation build-up that could give the Federal Reserve ammunition to raise interest rates later this year.

Other data on Tuesday showed housing starts and industrial production rebounded strongly last month, suggesting the economy was regaining steam early in the second quarter after almost stalling early in the year.

"The combination of higher prices, housing gains and industrial production support the narrative of a second-quarter rebound in GDP, and will stir talks of the necessity of at least one Fed hike later this year," said Jay Morelock, an economist at FTN Financial in New York.

The Labor Department said its Consumer Price Index increased 0.4 percent last month, the largest gain since February 2013, after rising 0.1 percent in March. That took the year-on-year increase in the CPI to 1.1 percent from 0.9 percent in March.

Americans also paid more for medical care, food, recreation, tobacco, motor vehicle insurance, airline fares and grooming. Economists polled by Reuters had forecast the CPI gaining 0.3 percent last month and advancing 1.1 percent from a year ago.

The so-called core CPI, which strips out food and energy costs, rose 0.2 percent after climbing 0.1 percent in March. In the 12 months through April, the core...


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