Manufacturing activity unexpectedly picked up in September, a survey showed yesterday.

The jump increased speculation the Bank of England could raise interest rates again, perhaps even as soon as their meeting on Thursday.

The CIPS/RBS manufacturing Purchasing Managers' Index rose to 54.4 in September from a downwardly revised 53.0 in August.

Most analysts expect the BoE's Monetary Policy Committee to hold interest rates at 4.75 per cent and raise them to 5.0 per cent next month but markets are jittery after being caught off guard by August's quarter-point hike.

"These data all suggest that the threat of another rate hike this week is very real with the inflation indicators only providing very modest comfort for rate doves," said James Knightley, economist at ING.

"We would not be surprised to see the BoE move this week rather than November."

The PMI data showed demand for British goods improved sharply in September, despite the strength of the pound, which hit a two-year high on a trade-weighted basis.

The output prices index fell to 55.1 from 55.3 in August, while the input one fell to a five-month low of 66.8.

The export orders index rebounded to 53.1 in September from 47.7 in August, while the broader measure of new orders also rose, encouraging manufacturers to boost output at its fastest rate since July 2004.

That in turn helped to push employment levels higher in September, after a contraction in August. Economists said people should not get too carried away by the survey's improvement given it followed an oddly subdued picture the month before.

"To put this into context, the index had fallen by much more than the euro zone surveys and the bounce today has gone some way to fixing this undershoot," said Alan Clarke, UK economist at BNP Paribas.

"We still believe the best news on the survey is behind us and the downward trend will resume in the coming months."