* Factory output up 3.8 percent year-on-year in Feb - ONS
* Data suggests GDP growth to hit 0.9 pct in Q1 - NIESR
* IMF raises UK growth forecasts sharply again
* Fund warns of housing, banking risks
(Updates with IMF's Blanchard, NIESR growth forecast and UK's
By William Schomberg and Ana Nicolaci da Costa
LONDON, April 8 Britain got a double boost on
Tuesday as its recovery from recession gathered momentum and the
International Monetary Fund raised the country's growth
forecasts more than for any other major economy.
Factories expanded production far more quickly than expected
in February, UK statistics office data showed. Separate surveys
showed a strong first quarter for companies and a long-awaited
pick-up in wages.
The signs that Britain is finally starting to put the
financial crisis behind it are well timed for finance minister
George Osborne. He visits the IMF this week, a year after Fund
officials urged him in vain to tone down his austerity programme
to get growth going again.
For the second time in six months, the Fund sharply raised
its forecasts for British growth, which it now sees hitting 2.9
percent in 2014 before easing to 2.5 percent next year. That was
up from previous forecasts of 2.4 and 2.2 percent.
"I think it's fair to say that our forecast was too
pessimistic," IMF chief economist Olivier Blanchard told
reporters at a Washington news conference. "Part of our job is
to ... warn when we see risks. Now fortunately, most risks don't
materialise. And this was again a case in which it didn't."
Deputy finance minister Danny Alexander said the new IMF
growth forecasts vindicated the government's approach, and that
it needed to press on with more spending cuts.
For all its gathering pace since early 2013, Britain's
economy is only expected to get back to its pre-crisis size in
the second quarter of this year, significantly lagging other
economies such as the United States and Germany.
With the recovery still in its early days, Bank of England
policymakers, who meet this week, are in no rush to raise
interest rates from their record low of 0.5 percent, especially
with inflation subdued. The Bank has signalled the second
quarter of next year as the most likely time for a rate hike.
In its assessment of the British economy on Tuesday, the IMF
warned of risks from "surging" house prices and said its big
banking sector could take a hit if growth in emerging economies
FACTORIES GEAR UP
The pound jumped on Tuesday when statistics showed
manufacturing output expanded by 1.0 percent in February from
January - its biggest increase since September. The annual
growth rate of 3.8 percent was the highest in three years.
Economists in a Reuters poll had expected a month-on-month
rise of 0.3 percent and a 3.1 percent increase for the year.
Overall industrial output climbed 0.9 percent on the month,
recovering from a weak January when bad weather hampered North
Sea oil and gas production.
Osborne last month announced measures to help manufacturers,
part of a long-standing attempt to make Britain's economy less
dependent on consumer demand.
Economic think tank NIESR said the industrial output data
pointed to 0.9 percent quarterly growth in the economy in the
first quarter. That would be the fastest rate since the second
quarter of 2010 and an acceleration from 0.7 percent in the last
three months of 2013.
Michael Saunders, an economist with Citi, said that type of
forecast could be set back by upcoming data, including a reading
of Britain's construction sector due on Friday.
"But so far the signs are that the UK started 2014 with very
strong growth," Saunders said in an email note to clients.
There were other signs of strength in the economy on
A survey by the British Chambers of Commerce showed six key
manufacturing balances, including investment plans, hit all-time
highs in the first quarter and services were strong too with
exports at a record high.
A second survey showed British employers are raising the
salaries they offer to new permanent staff at the fastest rate
in nearly seven years as they struggle to fill vacancies.
Britain has a way to go to recover fully from the effects of
the financial crisis. Manufacturing remains 8.2 percent smaller
than it was when overall economic output peaked in early 2008.
It remains to be seen if the strength in manufacturing
continues. A survey of purchasing managers published last week
showed Britain's factory sector saw its slowest growth in eight
months in March.
(Additional reporting by David Milliken in LONDON and Anna
Yukhananov in WASHINGTON; Editing by John Stonestreet)