A plethora of positive US economic data yesterday indicate inflation is still under control and eased concerns the US Federal Reserve might make a big hike in a key interest rate next week.

The consumer price index rose 0.3 per cent in July, with the core rate rising 0.2 per cent, in line with analysts' expectations.

Meanwhile, the Fed reported that US industry operated at 80.7 per cent of capacity in July, and the Commerce Department said construction on new houses and apartments picked up last month as well.

Those reports might not keep the Fed from raising a key interest rate when its decision-making open markets committee met next week, but would encourage the board to limit the increase to a small one, analysts said.

The Fed has raised interest rates once already this year, at its last meeting in June, for fear the US economy would overheat and that inflation would make a comeback.

"The (CPI) increase was enough to keep us expecting the Fed open market committee to decide to raise interest rates again next week," said Mr Chris Iggo of Barclays Capital.

"It does not tell us much about future inflation trends but, combined with the strength of labour market indicators over the last two months, the Fed will be concerned that inflation has bottomed out," Mr Iggo added.

"Despite the favourable inflation data, we expect the Fed to tighten by 25 basis points at the August 24th meeting, after which we expect the Fed to remain on hold," said Mr Gerald Cohen, an economist for Merrill Lynch.

Energy costs, which rose 1.2 per cent in July, accounted for half of July's CPI increase after they had fallen during the two preceding months. Gasoline prices at the pump rose 4.3 per cent in July.

Rises in industrial capacity were also in line with forecasts by Wall Street economists.

On a year-on-year basis, industrial capacity had grown 4.1 per cent by July.

But construction of new homes and apartments rose at a much higher rate that economists had expected, indicating the economy is still growing strongly.