By Jeannine Aversa
The Associated Press

WASHINGTON - Big industry sank deeper into its slump, with production plunging in October by the largest amount in a year. Wholesale prices were up sharply, but economists said the inflation picture was exaggerated by new model cars and trucks.

CONFIDENCE UP

Consumer confidence surged this month from its depressed levels in October, according to a report released Friday by the University of Michigan.   The university's index of consumer sentiment rose to 85.0 in early November from 80.6 in October.   The mid-November current-conditions index also rose to 93.8 from 92.4 in October.   The consumer-expectations index increased to 79.2 from October's 73.1 reading.   The University of Michigan report is released only to subscribers.   Consumer spending accounts for two-thirds of all economic activity in the country. Measurements of consumer confidence are widely watched, but economists caution that the attitudes reported may not be good indicators of actual spending.

The Federal Reserve's report Friday showing that production at the nation's factories, mines and utilities slid by 0.8 percent from the previous month underscored the state of the industrial sector as the weakest link in the economy's recovery.

While the Fed's report raised new fears that industrial malaise could infect the rest of the economy, most economists continued to believe that the country would avoid falling back into a double-dip recession.

October's drop, which followed a 0.2 percent decline in September, was the third month in a row that industrial production fell. It was the weakest showing since September 2001, when industrial output plummeted 1.1 percent after the terrorist attacks.

"Manufacturing is on its sickbed and may need stronger antibiotics in the form of tax cuts and more government spending," said Sung Won Sohn, chief economist at Wells Fargo.

In another report, the Labor Department's Producer Price Index, which measures prices of goods before they reach consumers, jumped 1.1 percent in October - after a tiny 0.1 percent rise in September - lifted by higher prices for new cars, trucks and gasoline.

Economists said they weren't alarmed. They believed the rise in car and truck prices was temporary and distorted by the annual introduction of new models, which tend to be more expensive.

The surge in gasoline prices in October partly reflected rising fears of war with Iraq that kept crude-oil prices strong. While a dramatic jump in energy costs could derail the economic recovery, many economists did not foresee that happening.

Dow Jones Newswires