Factories in turnaround on output

The Bank of England's interest-rate setters had more positive news on the economy to chew over at this week's meeting after figures showed British factory output back in growth.

Manufacturing activity last month was up for the first time since March 2008 as companies ratcheted up their production lines again, according to survey evidence from the Chartered Institute of Purchasing and Supply.

Its index of production, on which any score below 50 signals a contraction in output, rose to 50.8 from 47.4 in June. This was well above City forecasts of 47.7.

"The turnaround this signals has been remarkable," said Rob Dobson, senior economist at Markit Economics, which compiled the survey. As recently as November, the survey was registering just 34.9.

"This suggests the UK economy is likely to record positive growth through the rest of this year and into the next. However, ongoing deleveraging and rising unemployment still suggest that the recovery will be fragile," said James Knightley, economist at ING bank.

The Bank of England's monetary policy committee starts its meeting on interest rates on Wednesday and is expected to announce at noon Thursday that it will keep the cost of borrowing on hold, although it may opt to increase the quantitative easing process.

Engineering Employers' Federation head of economic policy, Lee Hopley, warned: "Anecdotal evidence from companies shows a lot of uncertainty still remains."