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Data shows momentum in economic growth; Rise in factory output, jobs brightens outlook

Factories are producing more cars, computers and household appliances, and applications for unemployment benefits over the past four weeks are at the lowest point since summer 2008.

Economic data released Thursday suggest that March will be the second straight month of strong job growth. And the reports helped Wall Street rebound a day after the market suffered its biggest drop in seven months.

Still, rising prices for household necessities and trouble overseas could slow the U.S. economy in the coming months.

"We have a lot of momentum in the U.S. economy right now," said Kurt Karl, chief economist at Swiss Re. "That's good, particularly since we're going to be challenged by higher oil prices" and the impact of Japan's earthquake and nuclear crisis.

A key reason for the brighter outlook is that factory production increased in February for the sixth straight month. The Federal Reserve said production of cars and auto parts jumped 4.2 percent, nearly matching January's gain. Production of furniture, electronics and appliances all rose.

Fewer people are seeking unemployment benefits. Applications fell last week for the third time in four weeks, the Labor Department said. The four-week average has dropped to a 386,250 -- the lowest level since July 2008. That's near the 375,000 level that, if sustained, tends to signal declines in the unemployment rate.

The decline is "strong evidence that the labor market recovery is for real," said Joshua Shapiro, chief U.S. economist for MFR Inc.

As Americans spend more on groceries and to fill their gas tanks, they have less money to spend on discretionary goods. That means consumer spending, which accounts for 70 percent of economic activity, could fall.

Overall, the Fed this week offered its most optimistic assessment of the economy since the recession ended, largely because of stronger job growth.

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