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Gasoline prices are seen at the Lukoil gas station in South Plainfield, New Jersey September 12, 2012.SHANNON STAPLETON/Reuters

U.S. retail sales rose by the most in six months in August, boosted by automobiles and high gasoline prices, but the underlying tone pointed to modest economic growth in the third quarter.

Other data on Friday showed a surge in gasoline contributed to consumer prices posting their largest gain in three years last month. Gasoline prices are taking a bite out of consumers' spending power.

Retail sales increased 0.9 per cent, the largest increase since February, the Commerce Department said on Friday, after a 0.6 per cent rise in July.

Gasoline and automobile sales accounted for the bulk of the rise in sales last month and details of the report pointed to an only modest increase in consumer spending this quarter after sluggish demand restricted the economy to a 1.7 per cent annual growth pace in the April-June period.

That suggests third-quarter economic growth would still be insufficient to cut into high unemployment, which on Thursday prompted the Federal Reserve to launch a third round of bond purchases and push its pledge to hold interest rates near zero through at least mid-2015 from late 2014.

"Consumers are not in an expansive mood. Weakening consumption is probable in the months ahead," said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake in New Jersey.

In a second report, Labor Department said the Consumer Price Index increased 0.6 per cent last month after being flat in July, That was the first increase in five months and was slightly above economist's expectations for a 0.5 per cent rise.

Gasoline prices, which recorded their largest increase since June 2009, accounted for about 80 per cent of the rise in consumer inflation last month.

However, underlying inflation was fairly muted. The core CPI, which excludes food and energy prices, increased 0.1 per cent for a second month in a row.

In the 12 months to August overall consumer prices increased 1.7 per cent, staying below the Fed's 2 per cent target, but advancing from July's 1.4 per cent rise.

"The retail sales and consumer price reports give the Federal Reserve very little reason to doubt their decision yesterday to increase monetary stimulus," said Kathy Lien, managing director of FX at BK Asset Management in New York.

Other data also showed stresses in the U.S. economy. Industrial production fell 1.2 per cent in August, the most in over three years, partly as a result of shutdowns to oil and gas production facilities due to Hurricane Isaac.

Gasoline prices at the pump rose 28 cents per gallon in August. In the retail sales report, gasoline sales surged 5.5 per cent, the largest increase since November 2009, after rising 0.4 per cent in July.

Automobile sales increased 1.3 per cent, the most since February, after gaining 0.1 per cent in July.

Excluding gasoline and autos, retail sales edged up 0.1 per cent after rising 0.8 per cent the prior month.

Away from gasoline and autos, sales were mixed, with receipts at building materials and garden equipment suppliers rising 1.0 per cent after increasing 1.2 per cent in July. There were gains in furniture sales and sales at restaurants and bars But there were declines in sales at clothing stores and at electronics and appliances shops. Receipts at sporting goods, hobby, book and music stores were flat.

So-called core retail sales, which exclude autos, gasoline and building materials, dipped 0.1 per cent after increasing 0.8 per cent in July.

Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.