By Jeannine Aversa
The Associated Press

WASHINGTON - Consumer prices rose by a modest 0.3 percent in September for the second month in a row, mostly reflecting higher gasoline prices that put a dent in motorists' wallets.

At the same time, production at the nation's factories, mines and utilities rebounded.

The Labor Department's latest reading Thursday on the Consumer Price Index, the government's most closely watched inflation barometer, should ease somewhat Federal Reserve policy-makers' concerns about deflation, an economically dangerous and widespread weakness in prices.

"While inflation is not a threat, deflation is clearly not an issue," said economist Joel Naroff, president of Naroff Economic Advisors.

Separately, the Federal Reserve reported that industrial production rose a solid 0.4 percent in September.

That represents a turnaround from the disappointing 0.1 percent dip registered in the previous month.

At factories, output jumped 0.7 percent in September led by an increase in automobile production; production at mines was flat; and output at utilities dropped 2.2 percent.

Excluding energy and food prices, which tend to swing widely from month to month, "core" consumer prices edged up by just 0.1 percent in September for the second consecutive month. That showing on the core inflation rate suggested that most other prices are moderate.

In a second report from the department, new claims for unemployment insurance dropped for the second week in a row, offering a hopeful sign that the pace of layoffs is slowing.

For the work week ending Oct. 11, new applications for jobless benefits dipped by a seasonally adjusted 4,000 to 384,000, the lowest level since early February. The week before claims fell by 17,000.

The trio of economic reports depicted an economy that is perking up and for the most part is enjoying a stable price climate.