The jump in industrial production follows a strong reading from the Institute of Supply Management's closely watched manufacturing survey. The ISM survey said U.S. factory activity expanded in August at the fastest pace since June 2011, buoyed by a rise in new orders rose and stronger demand from overseas.
The U.S. economy grew at an annual rate of 2.5 percent in the April-June quarter. Many economists predict growth is slowing to an annual rate of around 2 percent in the current July-September quarter. But they expect growth will pick up again in the final three months of this year and strengthen next year, as the impact of tax hikes and government spending cuts fade.
Federal Reserve officials begin a two-day policy meeting on Tuesday. Many economists expect the Fed will vote at that meeting to reduce its $85 billion per month in bond purchases, although only by small amount. The purchases have been designed to lower long-term interest rates as a way of boosting economic activity and jobs.