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Industrial output in the US climbed 0.5 per cent in August, fuelled mainly by a 3 per cent jump in computer production. Capacity use, closely watched by the Federal Reserve as an indicator of inflationary potential, rose to 83.5 per cent from 83.3 per cent in July.

The figures battered last week's optimism that lower inflation would divert the Fed from raising interest rates after its policy meeting next Tuesday. The Dow Jones index was nearly 18 points lower at 5,871.44 mid- morning, following reports that a senior Fed official indicated a quarter- point rise in the Federal Funds rate was likely next week.