Factory output in the UK has turned in its worst performance in more than two years, sending the pound to a five-and-a-half-year low against the dollar on Tuesday.
At one point the pound traded at $1.4408, down a cent and a half, before recovering a little to trade at $1.4415.
The figures come after the closely-watched CIPS/Markit purchasing managers’ index (PMI) survey said last week that factory output ended the year by growing at its slowest pace for three months.
According to the new figures from the Office for National Statistics, industrial output fell 0.7 per cent in November from October – the sharpest fall since early 2013.
Manufacturing output shrank by 0.4 per cent for a second month running, with a fall in pharmaceutical production having the biggest impact on total factory output. Output from the manufacturing sector was down 1.2 per cent from a year earlier.
Economists had been warning that the UK economy’s growth, which had been leading the pack of G7 industrialised nations, was vulnerable to a slowdown. Weakness on the industrial side of the economy means that the dominant service sector has to do even more of the heavy lifting to support GDP growth.
Economist Howard Archer, of IHS, said the ONS figures were a “significant dent” to hopes the UK economy picked up in the fourth quarter. He said: “It’s highly unlikely that industrial production was of any help to GDP growth in the fourth quarter.”
Ruth Miller, an economist at Capital Economics, said that the figures followed “a dire performance” through much of a year ago, and indicated that there would be “no change in the manufacturing sector’s fortunes”.
Chris Williamson, chief economist at Markit, said: “Manufacturers are having a torrid time”.
The Bank of England will publish its first monetary policy decision of the year on Thursday, but some analysts are not expecting the Bank to raise interest rates until the back end of 2016.
Even JP Morgan, one of the last big banks to believe that the Bank of England could raise its interest rates in the first half of this year, conceded that the manufacturing figures had forced it to rule out such a prospect. The US bank pushed back its forecast for the first rate rise to November.
The National Institute of Economic and Social Research (NIESR) expects annual growth of 2.2 per cent for 2015.
