U.S. factory output posted its sharpest increase in nearly a year in November as auto production staged a rebound, while consumer prices slipped, offering cautious optimism for the struggling economic recovery.

A separate report on Friday bolstered the view that a slowdown in manufacturing may have run its course. Factories have bounced back after being held down by Superstorm Sandy, which struck the East Coast in late October.

Despite last month’s rise, factory production remained below highs reached earlier this year. Analysts said this subdued recovery and tame price pressures provide ample scope for the Federal Reserve to stay on its ultra-easy monetary policy path.

“This is an economy that still has a lot of slack and upside potential,” said Robert Dye, chief economist at Comerica in Dallas. “There is a lot of dry tinder out there, the Fed has added to that with monetary policy and we have to get past the fiscal cliff issues to see if the dry tinder catches fire.”