Industrial production rebounded in November in its biggest gain since July, pointing to an acceleration in the pace of the recovery during the fourth quarter.

But consumer prices barely increased last month, a reminder of the still-abundant slack in the economy, making it certain the Federal Reserve will complete its controversial $600 billion government bond-buying program to further help the economy.

The economy is getting its groove back, said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

Industrial output rose 0.4 percent in November, the Fed said on Wednesday, after contracting 0.2 percent in October. For details, see [ID:nN15128935]

Separately, the Labor Department said its Consumer Price Index nudged up 0.1 percent, below economists' expectations for a 0.2 percent, following a 0.2 percent increase in October, the Labor Department said.

Excluding food and energy, core CPI ticked up 0.1 percent as expected, after being flat for three straight months.

The data had little impact on U.S. financial markets as investors worried about the debt crisis in the euro zone after Moody's said it may downgrade Spain's debt rating. U.S. stocks nudged up, while government debt prices rose.

The U.S. dollar rose against the euro and the yen.

Although core consumer prices edged up in November, inflation remains mute. The Fed on Tuesday reaffirmed its intention to purchase government bonds through the end of the second quarter of 2011, saying measures of underlying inflation were somewhat low.

The U.S. central bank also noted that the recovery from the worst recession since the Great Depression of the 1930s was still insufficient to lower a 9.8 percent unemployment rate.

In the 12 months to November, consumer prices increased 1.1 percent, in line with expectations. Core CPI gained 0.8 percent, edging up from October's record low 0.6 percent rise, but staying way below the Fed's comfort zone of between 1.7 percent to 2.0 percent.

Energy prices rose only 0.2 percent last month as household gas tumbled, helping to hold back overall CPI. Energy prices rose 2.6 percent in October. Food prices gained 0.2 percent, rising for a fourth straight month.

Elsewhere, new vehicle prices slipped 0.4 percent in November, extending the prior month's fall. Prices for used cars and trucks fell 0.5 percent, declining for a third straight month.

Apparel rebounded 0.2 percent after falling for three straight months, as retailers heavily discounted merchandise to attract shoppers.

Shelter costs edged up 0.1 percent in November, the second consecutive month of gains, which should support views that rentals were stabilizing.

But the housing market continues to struggle and remains one of the weak spots in the recovery. Applications for home loans dropped last as mortgage rates rose for a fifth consecutive week to touch seven month highs, the Mortgage Bankers Association said.

Adding to the downbeat outlook for the housing market, home-builder sentiment was remained stuck at record low levels in December, the National Association of Home Builders/Wells Fargo survey showed.

(Reporting by Lucia Mutikani; additional reporting by Pedro Nicolaci da Costa and Corbett Daly; editing by Jeffrey Benkoe)

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