LONDON—There were more mixed signals on the U.K economy Tuesday as data showed the manufacturing sector expanded at the strongest rate for at least 19 years in January, but bank lending remains subdued and house prices are falling.

The fresh evidence of an uneven recovery further complicates the task of the Bank of England as it weighs up a surge in the inflation rate, with data showing the economy shrank 0.5% in the final three months of 2010 when the U.K. was hit by snowstorms—the first quarterly contraction since autumn...