WASHINGTON — Wholesale inflation, helped by a record plunge in gasoline prices, dropped by the largest amount in more than three years in September. Industrial production was down sharply, too.

The reports Tuesday were viewed as evidence that the slowing economy is lowering inflation pressures — just what the Federal Reserve hoped for.

Wholesale prices fell by 1.3 percent, nearly double the expected decline, as the cost of gasoline sank by 22.2 percent, the biggest drop on record, the Labor Department reported.

Meanwhile, the Federal Reserve said output at the nation's factories, mines and utilities fell by 0.6 percent, the worst showing since the widespread shutdowns caused by Hurricane Katrina a year ago.

Manufacturing output dropped 0.3 percent, with widespread declines in auto production and other consumer goods, reflecting the fact that factories are trimming production to work down a backlog of unsold items.

"With the economy still in danger of a considerable slowdown as the housing market cools, manufacturing may be restrained further as firms try to avoid getting caught with excess inventories," said Bart Melek, an economist at BMO Capital Markets.

While the overall inflation performance was much better than expected, core inflation, which excludes energy and food, jumped by 0.6 percent in September, the biggest increase in this area in 20 months.

However, the increase in core inflation was heavily influenced by increases in new car prices, reflecting the end of dealer incentives that had been used to try to sell off a glut of unsold cars. Excluding the rise in car and truck prices, core inflation would have been up a much smaller 0.1 percent.

Brian Bethune, U.S. economist at Global Insight, called the overall performance of wholesale prices in September "unequivocally good news" and said it should keep the Federal Reserve on hold when policymakers meet next week.

While that was the predominant view of economists, financial markets couldn't help worrying about the big jump in core inflation and concerns that the earnings of technology companies may be disappointing.

The Dow Jones industrial average, which has set seven closing records over the past two weeks, retreated on Tuesday, dropping 30.58 points to close at 11,950.02.

After raising interest rates 17 consecutive times over two years, the Fed has left rates unchanged since August with economists predicting the central bank will likely remain on hold for the rest of the year.

The 0.6 percent fall in industrial production in September was a much bigger decline than the 0.1 percent dip Wall Street had been expecting.

For September, the 22.2 percent drop in gasoline prices was the biggest decline on record, surpassing the old mark of a 22.1 percent drop in March 1986. Since peaking above $3 per gallon in early August, gasoline prices have fallen by more than 80 cents.

Economists are looking for inflation to be well-behaved at the consumer level as well. They are forecasting a 0.3 percent drop in overall prices and a small 0.2 percent rise in core prices when the September report is released today.

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On the Net: Wholesale inflation: www.bls.gov/ppi

Industrial production: www.federalreserve.gov