Manufacturing shrinks at record pace in Sept

By Christina Fincher

LONDON (Reuters) - The manufacturing sector shrank last month at the fastest rate since records began almost 17 years ago as levels of output, new orders and employment registered unprecedented declines, a survey showed on Wednesday.

The shockingly weak figures will reinforce expectations that Britain has entered its first recession since the early 1990s and boost expectations that interest rates could be cut next week, particularly as price pressures are also starting to ease.

The Chartered Institute of Purchasing and Supply/Markit said its purchasing managers' index fell to 41.0 in September from a downwardly revised 45.3 in August. That was well below the consensus forecast of 45.0 and the weakest since the series began in 1992.

Any score below 50.0 indicates contraction.

The figures will disappoint policymakers who had hoped a weaker pound would help the manufacturing sector pick up some of the slack as the consumer sector slowed.

New orders from abroad fell at their fastest rate in seven years last month, suggesting any boost from the exchange rate had been more than offset by weaker demand from main trading partners.

Domestic new orders contracted at an even sharper rate, with that index falling to 36.1 from 41.9. Firms reported that the credit crunch and downturns in the housing and construction sectors had prompted clients to cancel or postpone orders.

JOB CUTS