Industrial output rise fastest since July 02

By David Milliken and Fiona Shaikh

LONDON (Reuters) - British manufacturing output rose faster than expected in September, and at its quickest monthly pace since July 2002, rebounding from a sharp drop in August, official data showed on Thursday.

The figures come just hours before the Bank of England will announce whether it is going to expand its 175 billion pound quantitative easing programme and add to the raft of conflicting data about the British economy over the past month.

The Office for National Statistics said factory output rose 1.7 percent in September, almost reversing a 2.0 percent decline in August. September's outcome was much higher than economists' forecasts of a 1.0 percent and the biggest gain since July 2002.

However, the ONS said the figures on their own would not lead to any significant change to its estimate of third-quarter GDP, which shocked analysts last month when it showed a 0.4 percent fall in economic output between July and September.

"Things have been very erratic and it's hard to say whether this represents the beginning of a bounce back," said Stephen Lewis, chief economist at Monument Securities.

Market reaction to Thursday's data was muted, with investors focussing on the Bank's policy decision at 7 a.m.

The ONS said 10 of the 13 manufacturing sub-sectors posted gains in September, with electrical and optical equipment, transport equipment and other manufacturing recording the strongest increases.

The wider industrial output measure, which includes power generation and natural resource extraction, rose 1.6 percent in September, again the strongest rise since July 2002 and beating forecasts for an increase of 1.0 percent.