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US Industrial Production Falls

A U.S. government report says American companies produced less in May because of low demand for products including cars.

The Federal Reserve (U.S. central bank) said industrial production fell 1.1 percent. The report also found the nation's factories are only operating at about 68 percent capacity, a record low.

Earlier, the U.S. Commerce Department said construction companies are starting to build more houses, although the number of houses being built is still down 45 percent compared to last year.

The housing report found a more than 17-percent increase in new home construction in May, while the number of permits issued for new projects jumped four percent. In April the pace of new home construction plunged to a record low.

Many economists blame the collapse of the U.S. housing market for helping to spark the global recession. The latest report follows several others that indicate sales are improving.

A separate report by the U.S. Labor Department Tuesday found the cost of food declined in May while gasoline prices rose.

The Labor Department's Producer Price Index measures the amount of money paid to farms and factories for a variety goods, and found prices increased slightly, by 0.2 percent, from April to May.

Still, the report found prices have seen their largest annual drop, as compared to May 2008, in almost 60 years.

Economists look at the Producer Price Index as an indicator of future inflation.

Tuesday's economic data comes one day before U.S. President Barack Obama prepares to unveil plans to improve the way financial institutions are regulated.

Mr. Obama says a lack of oversight allowed financial institutions to take too many risks and helped plunge the country into a financial crisis.

The president says his administration aims to streamline regulatory agencies so that they can prevent future crises quickly.

Meanwhile, an organization representing the U.S. banking industry, American Bankers Association, predicts an economic recovery is coming, but that the unemployment rate will still hit 10 percent.

Best Buy, the largest U.S. electronics chain, said Tuesday its profits for the first three months of the year fell almost 15 percent compared to the same period a year earlier. It also said sales at stores open at least 14 months fell more than six percent.

Some information for this report was provided by AP and Reuters.