WASHINGTON — Signaling that manufacturers are leading the economy into a recovery, output from the nation's factories, mines and utilities posted widespread gains in August.

In a further dose of good news, inflation remained essentially nonexistent as prices scarcely rose last month.

The August gains in industrial production marked the second straight increase after the global recession dried up the appetites of customers worldwide. Output rose 0.8 percent, the Federal Reserve said yesterday, beating analysts' estimates.

In part, the improvement reflected auto sales that were boosted by the government's now-ended Cash for Clunkers program. But analysts were impressed that output also rose across industries.

Meanwhile, the Consumer Price Index rose just 0.4 percent in August, after a flat reading in July, the government said. Prices fell 1.5 percent in the past year, as gas prices dropped sharply from record levels last summer.

BOFA-MERRILL LYNCH PROBE STEPPED UP

NEW YORK — The New York Attorney General's office subpoenaed five members of Bank of America Corp.'s board yesterday as part of an investigation into its acquisition of troubled investment bank Merrill Lynch & Co., according to a person familiar with the investigation.

The directors are expected to be questioned about what they knew regarding the mounting losses and bonus payments at Merrill before the deal closed on Jan. 1 and what role they played in deciding whether to disclose that information to shareholders, said the person, who asked for anonymity because the investigation is ongoing.

New York Attorney General Andrew Cuomo's office is also likely to ask about any threats made by federal regulators to remove board members if the deal wasn't completed, as Bank of America executives have said.

FORMER KMART CEO ADMITS '01 MISTAKES

ANN ARBOR, Mich.- A former Kmart Corp. CEO said yesterday that he made mistakes while leading the discount retailer that he wouldn't make again but didn't profit from its collapse into bankruptcy.

Charles Conaway testified in federal court as part of an effort to avoid millions of dollars in penalties for misleading investors about Kmart's financial health in 2001. He said he tried to act in Kmart's best interests before its January 2002 bankruptcy filing.

"I've made plenty of mistakes and there are a number of things I would do differently," Conaway said.

The Securities and Exchange Commission accused Conaway of failing to disclose Kmart was delaying payments to suppliers to save cash, months before the bankruptcy filing. In June, a federal jury in Ann Arbor found him liable in a civil trial.