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Last Updated: Monday, 3 July 2006, 17:09 GMT 18:09 UK
Rate fears rise on factory data
Ford production line
Strong UK manufacturing data boosts rate rise prospects
Economic statistics released on Monday have boosted the chances of an interest rate rise by the end of the year.

A key index of factory activity has grown at the fastest pace for nearly two years in June.

This has increased pressure on prices and adds to the belief that the Bank of England will raise rates.

But official figures showed that growth in services sector output slowed in April compared to the last quarter.

Strong productivity

Business services and transport both grew, but this good news was offset by weak data from hotels, restaurants and the distribution sector where car sales fell.

Overall, the service sector - which makes up 74% of the economy - grew by 0.5% in the three months to April, compared to 0.7% in the previous quarter.

However, manufacturing output, as measured by the purchasing managers index, rose to 55.4 in June, compared to 53.4 in May. Any figure above 50 indicates that the sector is expanding.

Treasury minister Ed Balls claimed economic expansion would continue during 2006.

"The underlying trends now show the economy is strong," he said.

Other official figures showed UK productivity growth rose to 1.5% on the year during the first quarter of 2006, the highest rate of growth since the third quarter of 2004.

In the long run, higher productivity, or output per worker, leads to higher living standards, and economists are concerned that the UK has been lagging behind European rivals in recent years.

Heatwave effect

Office productivity may slump during the current heatwave, according to a separate survey of 1,500 employees from recruitment agency Office Angels.

More than 80% of office workers said they found it difficult to concentrate during hot weather and 62% admitted normal tasks took longer to accomplish.

With a third of UK offices lacking air conditioning the survey half of the workers quizzed admitted to arriving late for work or taking long lunch breaks when temperatures soar.

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