UK industrial production fell at its fastest pace in six months beating estimates and raising concerns the economy may be heading for recession.
The Office for National Statistics reported industrial output fell 0.7 percent in October, more than the 0.3 decline that was forecast by analysts.
On a yearly basis IP declined by 1.7 percent, more than double the forecast of 0.7 percent fall and was the biggest drop since April.
The breakdown of IP data shows that manufacturing output also falling sharply by 0.7% when a -0.2% fall was expected. Britain’s manufacturing sector has been losing steam over the past few months as the global economy slowed and British companies were affected by the ongoing euro zone debt crisis. The majority of UK exports head to Europe.
The report today shows that the fourth quarter begins with weakness following on from the third quarter and the risks remain that at best the UK economy will register mildly positive growth but more likely growth will be to the downside.
This may pressure the Bank of England to introduce another round of quantitative easing at its February meeting.
Tomorrow’s Bank of England policy meeting may give some signals and their outlook on the British economy. Interest rates are expected to remain unchanged tomorrow.
Sterling dipped briefly after the data but remains supported above 1.5604 against the dollar.