The headline inflation figure fell in line with estimates. The Federal Reserve had warned on Tuesday that the recent rise in energy costs would temporarily raise inflation. A continued rise in fuel costs pushed up one-year consumer inflation expectations to a high reading of 4 per cent, the University of Michigan's Consumer Survey showed on Friday. High petrol prices not only affected inflation expectations but also ate into income expectations as well, taking the overall sentiment index lower to 74.3. This was less than the expected level of 76 and lower than the last reading of 75.3. The fortnightly survey questions 500 households on their financial conditions and attitudes about the economy which is correlated to consumer spending. While markets have reacted positively to upbeat housing and jobs numbers, until Americans have greater confidence in longer-term employment prospects and salary growth they will not spend at a greater rate. Separately on Friday, data from the Federal Reserve showed industrial production was flat last month, reflecting slower than expected manufacturing and a decline in mining. By major components, manufacturing increased 0.3 per cent, following a 1.1 per cent surge in January. Analysts had forecast a 0.5 per cent advance. Utilities were unchanged after a 2.2 per cent drop in January as output fell due to unusually warm winter weather. Mining fell 1.2 per cent, after a 1.6 per cent dip the month before. The 1.1 per cent dip in auto production is very hard to square with industry data showing a further hefty increase, so we expect either a big rebound in March or an upward revision to the February number. Overall, the industrial recovery is continuing at a moderate rate, but we expect most of the action in the economy this year to come in the services sector," said Ian Shepherdson, chief US Economist at High Frequency Economics.