Rising industrial production sends message of recovery

Following an upwardly revised 1.0% jump in industrial production in July, factory output increased another 0.8% in August, signaling that manufacturing may be getting set for a fairly robust recovery.

The cash for clunkers program, which helped clear out bloated inventories, played a role, but production was solid across a number of sectors.

The rise in production lifted capacity utilization from 69.0% to 69.6%. So there is still plenty of slack in the economy and very little upward push on wages - that's bad for spending and savings but bodes well for inflation in the short and medium term.

Therefore, the Fed is feeling very little pressure to raise interest rates, and probably won't budge on the fed funds rates until it sees solid growth in jobs.