Output at 16-year high but worries remain

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The Office for National Statistics data showing a 0.3% rise in July - the third consecutive month-on-month gain - pushed annual output growth to 4.9%, the highest since December 1994. Nine out of 13 manufacturing sectors enjoyed rising output over the month.

The figures came as Bank of England rate-setters began their monthly policy meeting, at which interest rates are expected to be held at their 0.5% record low and quantitative easing - the Bank's efforts to boost the money supply - left unchanged at £200 billion.

However, other surveys point to slowing activity and many experts believe manufacturers are still in danger of slipping back into a slump.

Jonathan Loynes of Capital Economics warned: "While July's figures provided some comfort, they certainly do not eliminate the danger of a double-dip in the UK economy later this year or in 2011."

Overall production also turned around a 0.5% fall in June with a 0.3% rise.

Howard Archer of IHS Global Insight added: "The manufacturing sector will find it very difficult to match its first-half growth performance over the second half of the year."