Factory production slips again

GLOOM surrounding Britain's manufacturing sector deepened today with news of another unexpected fall in factory output.

Reinforcing expectations that the Bank of England will leave interest rates at 4.75% at its meeting this week, official data showed output dipped 0.1% in October against expectations of a 0.3% increase.

Compared with a year earlier, it was 0.5% lower - the weakest annual rate since August 2003.

The Office for National Statistics said sky-high oil and metals prices were squeezing manufacturers' margins across a whole range of industries.

Broader industrial production - which includes mining and energy output as well as manufacturing - also fell 0.1% to clock up a fifth successive monthly decline and the longest string of falls since 2001. Oil and gas production was hit by offshore platform maintenance.

The grim news was once again at odds with more upbeat survey evidence showing the manufacturing recovery intact. The CIPS/Reuters purchasing managers' report last week claimed a surge in new orders in November had triggered the fastest growth in factory activity since the summer.

Economist James Knightley at ING Financial Markets said falling oil prices should give manufacturing some respite in coming months, but added: 'Nonetheless, activity data on the whole is on a weakening trend which increases the probability that inflationary pressures will remain subdued, possibly prompting rate cuts next year.î