November 5, 2008 / 10:18 AM / 11 years ago

Factory output posts biggest run of falls in 28 years

Men work in the paint shop of the Aston Martin production facility in Gaydon, September 3, 2008. REUTERS/Darren Staples

LONDON (Reuters) - Manufacturing output fell for the seventh month and by far more than expected in September to mark the longest stretch of monthly declines in 28 years, official data showed on Wednesday.

The Office for National Statistics said manufacturing output fell by 0.8 percent in September, twice the rate of decline forecast by analysts, pushing output 2.3 percent lower than a year earlier, the biggest decline since May 2003.

Manufacturing has now fallen for seven months, the longest run of monthly drops since December 1980, and does not appear to be seeing any benefit from the weakening pound over the last year.

Coming on top of a survey showing the service sector shrank at its fastest pace in at least 12 years, the data reinforced expectations the Bank of England would slash interest rates on Thursday to prevent a prolonged and painful recession.

“Today’s data are terrible,” said George Buckley, chief UK economist at Deutsche Bank. “This raises the risk the Bank of England moves by more than the 50 (basis points) we expect tomorrow.”

The wider industrial production index fell by 0.2 percent in September. Analysts had predicted a slightly bigger drop.

The ONS said, other things being equal, the quarterly decline in industrial production would shave 0.02 percentage points off the preliminary estimate of GDP which showed output shrank 0.5 percent in the third quarter.

The ONS said the drop in manufacturing over the month was driven by transport, mainly cars and auto parts — car sales have collapsed across Europe in recent months — chemicals and paper and publishing.

“Manufacturing is clearly not plugging the gap left by recessionary services activity,” said Lena Komileva of Tullet Prebon.

Editing by Mike Peacock

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