Manufacturing drop adds to UK economy worries

By Christina Fincher and Sumeet Desai

LONDON (Reuters) - British manufacturing output fell in March at its sharpest rate in six months as a drop in car production led a broad-based retreat after a strong start to the year.

The surprise decline suggests Britain's economy may be set for a broad-based slowdown, with manufacturing unable to compensate for a rapidly weakening consumer sector.

The pound fell on speculation the Bank of England might even cut interest rates on Thursday. Most analysts expect a cut next month.

"It is another soft economic reading for March and suggests the slowing in the economy is gaining traction," said George Buckley, chief UK economist at Deutsche Bank.

The Office for National Statistics said manufacturing output fell 0.5 percent in March. This was the weakest since last September and compared with analysts' forecasts of an unchanged reading.

The wider measure of industrial production also fell by 0.5 percent, its sharpest monthly fall in more than a year

Other things being equal, the figures would shave 0.02 percentage points off the preliminary estimate of gross domestic product growth in the first quarter.

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