THE estimate of economic growth between April and June was revised upwards yesterday following better-than-expected output in the manufacturing sector.

It is now thought the UK economy grew by 0.5 per cent in the quarter and by 1.8 per cent on the same period a year earlier - the lowest rate since the start of 2002.

The latest figures from the Office for National Statistics compare with a previous forecast of quarter-on-quarter growth of 0.4 per cent and 1.7 per cent for the full year - the lowest rate for 12 years.

The revision came after output in the beleaguered manufacturing sector was shown to have fallen by 0.3 per cent, compared with a previous forecast of 0.7 per cent.

A sharp rise in exports lay behind the revision for the industrial sector.

Economists said the improvement did little to boost the overall outlook, particularly as household spending was shown to have grown by 0.2 per cent in the quarter, following a 0.1 per cent rise in the previous three months.

Such a level of expenditure means the UK is on course to increase household spending by 1.5 per cent this year - the weakest annual performance since 1992.

The Bank of England has already forecast a lacklustre performance for this year, but told the City earlier this month that it expected an improvement next year.

That dealt a blow to households hoping for further interest rate cuts, following the bank's knife-edge decision to cut its base rate to 4.5 per cent.