WASHINGTON (AP) -- Output at the nation's factories, mines and utilities rose for the third straight month in September, positive signs for the ailing manufacturing sector.
Higher output of motor vehicles and parts spurred much of the increase, due in part to the government's Cash for Clunkers program. Still, steel and other sectors also posted gains, and General Electric reported separately Friday that its industrial businesses grew in the third quarter.
"Thanks to the Cash for Clunkers program, replenishing inventories and exports, U.S. factories are getting back into business," Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients.
The Federal Reserve said industrial production rose 0.7 percent last month. That beat the 0.2 percent increase that Wall Street economists expected, according to a survey by Thomson Reuters.
August output also was revised higher, to 1.2 percent from 0.8 percent.
Industrial output increased at a 5.2 percent annual rate in the July-September quarter, the Fed said, the largest quarterly gain since the first three months of 2005. It's also the first quarterly increase since the beginning of 2008.
Factory output, the single largest slice of industrial production, rose for the third straight month, increasing 0.9 percent. Much of that improvement was fueled by higher auto manufacturing, which rose 8.1 percent.
But autos weren't the whole story. Excluding motor vehicles, factory output rose 0.5 percent.
The production of steel and other metals rose 3.4 percent, while computer and electronic products, and aerospace equipment also saw higher output.
Auto companies have benefited from the clunkers program, which provided rebates of up to $4,500 to consumers who traded in older cars for newer, more fuel-efficient models before ending in August.
Automakers have ramped up operations to replace inventories depleted by the clunkers program and factory shutdowns earlier this year. General Motors and Chrysler cut back on production in early summer as they restructured and emerged from bankruptcy protection.
As other companies rebuild inventories that were slashed during the recession, the increased output should contribute to a broad, but slow, economic recovery. For example, GE's third-quarter results were dragged down by its troubled financial unit, but the divisions that make wind turbines and household appliances posted gains.
Profits for GE's industrial businesses edged up 4 percent, but sales declined 13 percent, as demand was lackluster.
Many economists worry that industrial production may lag once inventory rebalancing is complete. Consumer demand remains sluggish as households work to reduce debt and struggle with widespread job losses and stagnant wages.
Still, retail sales, excluding autos, rose for the second straight month in September, the Commerce Department said earlier this week.
Mining production, meanwhile, rose 0.7 percent last month. Utility output dropped 0.7 percent.
Industrial companies are using more of their plants and equipment, though operating rates remain below levels associated with a healthy economy.
The operating rate for the nation's factories, mines and utilities was 70.5 percent last month, up from record-low levels in June but still below the long-term average of about 80 percent.
Despite the gain, industrial production is 6.1 percent below year-ago levels, the Fed said.