LONDON, July 7 (Reuters) - British industrial output unexpectedly rose thanks to strong oil and gas production but manufacturing fell, underscoring a challenge for finance minister George Osborne before Wednesday's budget statement.
Industrial output rose by a monthly 0.4 percent in May, official figures showed on Tuesday, beating all forecasts from economists in a Reuters poll who had predicted a drop of 0.2 percent.
Oil and gas output, which had been strong in the previous two months as global oil prices began to recover from last year's fall, leapt by 7.3 percent from April, the biggest increase in more than a year.
An official at the Office for National Statistics said the government believed the increase might also be linked to a tax cut announced in March.
However, the figures showed up the weakness in much of British manufacturing, something Osborne has said he wants to tackle in his budget announcement.
Britain's economy looks set for another strong year of growth after expanding at its fastest rate in eight years in 2014. But the recovery remains lopsided with consumer spending driving most of the growth.
Output in the factory sector in May fell by much more than any forecast by economists in the Reuters poll, dropping by 0.6 percent after a fall of 0.4 percent in April.
Britain's manufacturers have struggled to make much headway in recent months due to a combination of weak demand in Europe and the strengthening of the pound against the euro currency.
A British employers' group said earlier on Tuesday that Britain's economy remained unbalanced in the second quarter when the dominant services sector grew but manufacturing was weak.
A survey of manufacturers published last week showed growth in the sector was its slowest in two years in June.
The ONS data released on Tuesday showed that compared with a year earlier, industrial output rose by 2.1 percent, the strongest annual growth since April of last year, and manufacturing was up 1.0 percent.
In the three months to May, compared with the same period of last year, growth in manufacturing slowed to 0.8 percent, its weakest rate since the three months to October 2013.
Some economists had said the May data could be boosted by the unexpectedly decisive outcome of the May 7 national election which was won by the Conservative Party of Prime Minister David Cameron.