Manufacturing activity rebounded last month as industry pushed up prices again, highlighting the risks to the Bank of England of any early cut in interest rates.

The stronger tone of the CIPS/RBS purchasing managers' index (PMI) in November was a surprise to City analysts and brought signs that industry is still able to flex its muscles over pricing despite the credit squeeze and fears of a general slowdown.

The Bank of England's Monetary Policy Committee, which meets this Thursday, is set to discuss whether to cut rates by a quarter point this month. While the result still hangs in the balance, today's figures tipped the scales against the chances of a rate cut.

The headline PMI measure of activity rose to 54.4 last month from 52.8 the month before, on a scale where any figure above 50 indicates rising activity. The increase reflected higher export orders and strong output.

But Paul Dales, of Capital Economics, said: "Set against a slowing world economy, the strong pound and tightening credit conditions this seems far too optimistic to us. We would not be surprised to see the manufacturing sector enter a recession in the coming quarters."

The MPC will however be concerned to see that the sub-index of prices charged rose to 57.5, the third-strongest figure on record, while input prices rose at a robust pace.

Signs that manufacturers are still succeeding in getting their customers to accept dearer goods will be grist to the mill of the hawks on the MPC, who have argued that the threat of inflation which the Bank identified before the summer's financial turmoil remains significant.

Analysts' attention will now focus on Wednesday's PMI report into the services sector for last-minute clues into the health of the economy ahead of the MPC's decision.

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