Manufacturing output grew at its strongest pace in almost a year in March, official data showed yesterday.
It supported the growing market view that the next move in UK interest rates will be up.
The Office for National Statistics said manufacturing output rose 0.7 per cent in March, after a 0.1 per cent fall in February. That was more than three times higher than analysts' expectations and the strongest rise since April 2005.
Output rose by 1.1 per cent on a year ago, also much stronger than expected.
Chancellor Gordon Brown hailed the figures, saying: "British growth is strong, strengthening and will strengthen even more in the months to come."
But Howard Archer, economist at Global Insight, added: "The growing evidence of significant recovery in the manufacturing sector will reinforce expectations that the next move in interest rates is up."
The Bank of England said in its quarterly projections on Wednesday that inflation would hit its 2.0 per cent target in the medium term based on slightly higher interest rates.
They currently stand at 4.5 per cent.
That prompted many analysts to ditch any lingering hopes for a rate cut, although most expect rates to stay on hold for many months.
The ONS said March's rise in manufacturing output was driven by a strong pick-up in the production of transport equipment. Production of electrical and optical goods were also strong, helped by sales of televisions in the runup to this year's World Cup soccer tournament.
The broader measure of industrial production, which includes Britain's North Sea oil fields, also rose by much more than expected - up 0.7 per cent in March, and by 0.3 per cent on the year.
Industrial production rose 0.8 per cent in the January-March period, the first calendar quarterly rise since quart er four 2004, and the strongest such rise since quarter three 1999.
The ONS said that would add 0.02 percentage point to first quarter gross domestic product growth, as its preliminary estimate of Q1 GDP had put industrial production up 0.7 per cent.
In three-month on three-month terms, the 0.8 per cent rise was the strongest since May 2004.
Business leaders welcomed the figures but Birmingham Chamber of Commerce and Industry sounded a note of caution following high profile manufacturing casualties during the first three months of the year.
James Cooper, policy adviser, said: "It is encouraging that the UK manufacturing sector is continuing to grow following a poor 2005, albeit at a small rate.
"However, it is important to note that businesses still face threats from high energy and raw material prices. We have also seen some high profile manufacturing crises in Birmingham in 2006.
"Only this week we have had the announcement of the closure of the HP Sauce factory in the city, while one of the city's oldest firms, Firmin & Sons, went into administration last month." ..SUPL: