* February rise in industrial output eases recession risk
* More bond purchases still needed - Bank of England's
* UK economy grew 0.1 pct in first quarter - think-tank
By Olesya Dmitracova and David Milliken
LONDON, April 9 British industry bounced back
surprisingly strongly in February, pointing to a nascent
economic recovery that may nonetheless need more help from the
central bank to gather pace.
A 1 percent rise in industrial output from January lifted
production in February slightly above its average level in the
last three months of 2012, when the economy shrank.
The data, released on Tuesday by the Office for National
Statistics, fed into a monthly estimate of gross domestic
product by the National Institute of Economic and Social
Research, which found 0.1 percent growth in the first quarter.
The releases allay fears of two consecutive quarters of
economic contraction, which would tip Britain into its third
recession in less than five years.
But "glimmers of hope" do not remove the need for more
quantitative easing through bond purchases by the central bank,
according to Paul Fisher, a Bank of England policymaker.
Fisher said the bank's Funding for Lending Scheme was
improving conditions for borrowers, but the economy still needed
other help until that scheme got up to full steam.
"We need some sort of background level of QE to see us
through this period, particularly while FLS has its full impact
for the remainder of this year," he told a newspaper.
Fisher and two other policymakers voted for 25 billion
pounds ($38 billion) of extra gilt purchases in February and
March, on top of the 375 billion pounds bought so far to pump
money into the economy.
The pound rose to within sight of a 1-1/2 month high against
the dollar after the industrial output data spurred some
cautious optimism that Britain might avoid renewed recession.
February's strengthening in industry, which late last year
was the main drag on the economy, was led by a 0.8 percent rise
in manufacturing output, as well as by higher demand for energy
during the unusually cold month.
"If the level of (industrial) production remains the same in
March, then over the first quarter as a whole industrial
production will have risen by 0.1 percent," said David Tinsley,
economist at BNP Paribas.
"These apocalyptic stories of a negative (first-quarter GDP)
print and a triple dip (into recession) are still certainly not
guaranteed," he added.
Industrial output was boosted by the biggest rise in the
production of electricity and gas since October, due to an
average temperature during February 0.9 degrees Celsius below
its long-term norm.
It is also likely that continued cold weather supported
industrial activity in March, economists said.
The first official estimate of how Britain's economy fared
in the first quarter will be released on April 25.
Until then, the prospect of return to recession hangs in the
balance. While a survey of purchasing managers showed
manufacturing activity shrinking in March, alongside a risk of
weak construction output during the first quarter, there are
some signs of a recovery.
A survey out on Tuesday showed that the FLS is helping
Britain's housing market, with sales at their highest level in
three years and prices broadly stable in March.
Resilience in the retail sector adds to optimism, as sales
kept growing last month despite the cold weather.
However, ONS data also released on Tuesday showed Britain's
goods trade deficit grew much more than expected in February to
reach its biggest since August at 9.4 billion pounds, mainly due
to sluggish exports to other European Union countries.