THE US economy for the second straight day produced stronger- than expected performance figures that sent share prices lower on fears of higher interest rates.

However, the US Federal Reserve governor, Mr Lawrence Lindsey, stressed the economy was currently under no serious inflationary pressures. Nevertheless, inflation indicators "are flashing yellow", he said.

"They're not flashing red or green. We re on the verge of having an economy where we might expect to see some inflationary pressure. On the other hand, the inflationary pressures aren't there."

Second-quarter growth figures, new home sales, consumer spending and factory orders all point to a surging economy, prompting fears among investors that the Federal Reserve - the US central bank - would intervene to raise interest rates in order to curb inflation.

"It's not time to move," Mr Lindsey said, but added: "It's much more likely that we would move up rather than down."

The Federal Reserve's Open Market Committee is to meet September 24th when it will decide on whether or not to increase the federal funds rate, charged by banks making overnight loans among themselves.

The rate, currently at 5.25 per cent, affects the cost of credit throughout the economy and serves as a lever by which growth, can be either stimulated and restrained.

The consumer price index has risen at an annual 3.5 per cent in the first seven months of the year, compared with 2.9 per cent in the same period in 1995.

The Commerce Department reported yesterday that US factory orders rose 1.8 per cent in July, the fourth increase in the last five months and outstripping predictions by analysts who had foreseen a one per cent advance.

In a separate announcement, the department said consumer spending, which accounts for two-thirds of gross domestic product, advanced 0.2 per cent in July.