LONDON -- The first signs of a rebound in the economy emerged yesterday following news that summer has brought a fresh rise in house prices, the fastest expansion for a year in the key service sector and a recovery for industry.

Halifax, Britain's biggest mortgage lender, reported that house prices moved ahead strongly in July, defying forecasts of a property market crash.

The average house price rose to £132,000 in July, up 1.3% on the month compared with the 0.6% gain in June that prompted many forecasters to proclaim the imminent death of the property boom.

Service sector companies, which include transport and computing firms as well as hotels and restaurants, increased output in July for the fourth month in a row.

This is the fastest pace of growth since last May, according to the Chartered Institute of Purchasing and Supply.

New business had picked up as clients became more confident about the geopolitical environment, CIPS members reported in a survey that took place recently's terrorist attack in Jakarta.

After last month's record surge in consumer debt, analysts said evidence of a pickup in house price inflation and upbeat reports from service sector companies and industry all but ruled out a cut in interest rates when the Bank of England's monetary policy committee (MPC) makes its decision tomorrow.

"This data is certainly not conducive to further interest rate cuts," said Ciaran Barr, chief UK economist at Deutsche Bank. Analysts had been expecting further rate cuts after all but one of the nine-strong MPC voted to cut borrowing costs last month to a 48-year low of 3.5%.

Barr said that while further cuts were now unlikely the Bank would not want to risk damaging the fledgling recovery by raising rates until the middle of next year at the earliest.

Hawks on the committee are likely to be alarmed by signs of a revival of Britain's debt-fuelled consumer boom, while signs of an industrial revival could also convince the MPC that it had done enough to kickstart growth, analysts said.

Hot weather helped boost industry in June, government statisticians said yesterday. Industrial production rose by 0.7% as demand increased for electricity to cool offices and homes.

The UK exported electricity to France for the first time ever in June, as demand on the continent surged. Manufacturing companies reported a 0.2% rise over the month, higher than analysts' expectations of a 0.1% increase. The boost came from strong rises in output from weapons and ammunition firms re-stocking after the war, and a 9.2% rise in car production.

Halifax said it is confident house prices will remain buoyant, despite the 19% rise over the past year and the doubling in average prices since 1998.

It said property values are underpinned by interest rates at 50-year lows plus the unexpected strength of the job market, with 101,000 more people in work over the past three months.

Martin Ellis, its chief economist, acknowledged that personal debt levels have reached "record highs" but said affordability in most regions remains strong. "Across the UK, the average new borrower is spending 14% of gross earnings on mortgage payments, well below the average of 22% since 1983." Even in London, where there has been patchy evidence of limited price falls, the Bank said the outlook has brightened.

The Bank warned that the "chronic shortage" of new homes will keep prices in London and the south-east high, predicting a cumulative shortage of half a million homes in the region by 2021 unless the decline in new house building is reversed.

But the Halifax figures do contain indicators of a future slowdown, confirming the dramatic collapse in the number of first-time buyers entering the market, now at a record low.

The typical first-timer in London is now having to pay £193,500 and find a deposit well in excess of £20,000.

The Bank also admitted that the number of property transactions this year is likely to be down by around 10-15%.