WASHINGTON  - A jump in the cost of gasoline pushed US consumer prices up in August at the fastest pace in more than three years and squeezed spending on other items, threatening to further slow the already sluggish economy.

At the same time, production at the nation’s factories, mines and utilities dropped by 1.2 per cent, the biggest decline since March 2009, other data on Friday showed. The sour mix of numbers was tempered by an unexpected increase in consumer sentiment in early September and signs underlying inflation pressures remained contained.

Economists said the reports helped justify the Fed’s decision on Thursday to launch a third round of bond purchases to try to lower borrowing costs and spur growth. The Consumer Price Index increased 0.6pc last month, the first increase in five months and the biggest gain since June 2009, the Labour Department said. Gasoline prices, which also recorded their largest increase since June 2009, accounted for about 80 per cent of the rise.

With gasoline costs increasing, service station chalked up healthy receipts. A second report from the Commerce Department showed sales at gasoline stations shot up 5.5pc last month, helping to push overall retail sales up 0.9 per cent.

It was the biggest gain in retail sales since February.

Sales of automobiles and building and garden equipment were

also strong, but sales elsewhere were weak. A gauge that tracks the consumer spending component of the government’s GDP measure actually fell 0.1 per cent.