US consumer spending and income rose more than expected in March, while an influential measure of inflation - the core price index - topped economists' expectations, the government reported on Monday.
In other reports that raised caution about inflation, manufacturing activity climbed in April and construction spending jumped to a record high in March.
The data's inflationary implications spooked the US Treasury market, pushing bond prices down and yields up. But the data did little to change the view that the Federal Reserve, which has increased rates 15 times since mid-2004, may pause after raising rates once more this month.
"I don't think it's going to make any difference for the Fed," Ken Landon, senior currency strategist at J.P. Morgan Chase, said of the data. Fed Chairman Ben "Bernanke has already said even if the data doesn't justify a pause, the Fed might pause anyway."
In Monday's first report, the Commerce Department said consumer spending rose 0.6 percent in March as incomes jumped, although much of the gain was eroded by the pickup in inflation.
The price index for consumer spending shot up 0.4 percent, while the core price index closely watched by policy-makers at the Federal Reserve rose 0.3 percent. The rise in the core inflation measure was a touch ahead of Wall Street forecasts and the largest one-month rise since October.
In a later report, the Institute for Supply Management said its index of factory performance climbed to 57.3 last month from 55.2 in March. Economists had expected little change. A reading above 50 indicates growth in the sector, which - according to this measure - has been expanding steadily for nearly three years.
In another report, the Commerce Department said construction spending jumped 0.9 percent in March, more than double expectations, to a record high on the back of soaring outlays on private residential building.
Construction spending rose to a seasonally adjusted annual rate of $1.199 trillion in March from an upwardly revised $1.189 trillion rate in February.
According to the consumer spending report, personal income rose 0.8 percent in March, partly reflecting a big pickup in transfer payments from the Medicare health-care program.
Despite the 0.4 percent gain in the price index for personal spending in March, the year-on-year reading held steady at a 2.9 percent gain. However, the rise in the core index, which strips out volatile food and energy prices, moved up to 2 percent - the upper edge of the Fed's perceived inflationary comfort zone.
The rise in inflation, along with the increase in construction and manufacturing, was seen by bond investors as boosting odds of two more Fed interest-rate increases.
Bernanke told Congress last week the Fed could pause at some point to assess incoming data and see whether its forecast of more sustainable growth ahead seems on the mark.