The manufacturing sector received another boost yesterday after it emerged that output improved for the fourth month in a row in August - the longest run of monthly increases for seven years.
The Office for National Statistics (ONS) said production levels expanded by 0.4 per cent between July and August, confirming other upbeat surveys suggesting that factory bosses were benefiting from more domestic and foreign orders.
Despite the progress, the British Chambers of Commerce (BCC) cautioned that the recovery was still fragile as figures remained weak by historical standards.
BCC economic adviser David Kern added that the prospect next month of a rise in interest rates to five per cent by the Bank of England's Monetary Policy Committee (MPC) still overshadowed the manufacturing sector.
He said: "To minimise any damage to manufacturing that may result from such a move, the MPC must ensure that, unlike in August, an increase in rates does not come as a shock.
"The MPC must also make it clear that, if a rise is necessary, five per cent will be a ceiling and a further series of interest rate increases is not on the cards."
Between June and August, manufacturing output increased by 0.7 per cent against the previous quarter while the figure was up 1.2 per cent on a year earlier.
HSBC chief economist John Butler pointed out the sector was still under-performing other economies. He added: "Despite the rebound in consumer activity, UK manufacturers are still not benefiting.
"The level of production of consumer goods is unchanged over the past three months and, in fact, the production of consumer durables has contracted in each of the past four months."
The ONS said the broader industrial production measure, which includes mining and quarrying and utility usage, showed a rise of just 0.1 per cent in August.
The lacklustre performance reflects a sharp drop in oil and gas extraction, in part due to scheduled maintenance work on North Sea oil rigs.
Howard Archer, chief UK and European economist at Global Insight, said the latest manufacturing figures offered near-term encouragement, but added that there remained "significant clouds" on the horizon.
He said: "In particular, foreign demand is at risk from a likely slowdown in global growth over the coming months as well as from the current strength of the pound."
Recent manufacturing surveys have suggested output will grow robustly in coming months as well, especially as the strong pound does not seem to have dampened export demand, and this is reinforcing the case for higher rates.
"Overall, this is a healthy report that should add further weight to the case for a 25 basis point rate hike in November," said James Knightley, economist at ING.
Looking at industrial production, the ONS said an increase in gas output had helped offset a sharp decline in oil production due to scheduled maintenance work on North Sea oil rigs.
But the robust monthly increase masked a modest easing in the three-month rate, which analysts said clouded the outlook for economic growth in the third quarter, especially after data showing weaker services output in July.
Yesterday's data showed factory output rose by 0.7 per cent in the three months to August compared with the previous three months, down from 0.8 per cent in the three months to July.
The wider industrial measure, meanwhile, slowed to be flat over the period.
Mark Miller, economist at HBOS, said: "The manufacturing sector is recovering gradually."
