The chances of a cut in interest rates later this week have strengthened after official data pointed to further woe in the manufacturing sector.

Figures released yesterday by the Office for National Statistics (ONS) show that factory production during May weakened by 0.2 per cent on the previous month.

That put paid to hopes of a sustained recovery after April's 0.3 per cent improvement and compares with expectations of no change among analysts.

The data will be a key consideration for the Bank of England's Monetary Policy Committee (MPC) when it begins its two-day ratesetting meeting on Wednesday.

Opinions in the City are divided over whether the MPC will reduce the cost of borrowing to 3.5 per cent - the first cut since February.

Simon Rubinsohn, chief economist at stockbroker Gerrard's, said the data "strengthened" the case for a cut,although he believed the committee may choose to wait until August before acting.

HSBC economist John Butler added: "In our view the manufacturing sector requires stronger global demand and a sustained lower level of sterling rather than another 0.25 per cent cut in interest rates."

The latest month-on-month decline in output from hard-pressed manufacturers was largely due to significant falls in car production and from the electrical and optical equipment sector.

The performance means the year-on-year rate of decline rose to 2.1 per cent from 1.2 per cent in April.

Overall, industrial production rose 0.1 per cent as stronger output from mining and quarrying and electricity offset the weakness in manufacturing.