A survey has shown that British manufacturing activity accelerated unexpectedly last month to its fastest pace in three years while output price inflation hit its highest level in at least 15 years.
The Bank of England is widely expected to leave borrowing costs unchanged this week but the surprisingly strong readings raised expectations of higher interest rates to come.
The CIPS/NTC purchasing managers' index rose to 55.7 last month from an upwardly revised 54.7 in June - the highest since July 2004. Any reading above 50 indicates expansion.
Average factory gate prices rose at the fastest rate since the series began in January 1992 while input price inflation rose at its fastest rate in almost a year.
Domestic demand appeared to be driving the gains as new exports orders grew at the slowest rate since the start of the year. New orders overall, however, rose at their fastest pace in 13 months.
Manufacturing employment rose for a seventh successive month with firms creating more jobs than at any time in the past three years.
