Industrial production plunged at the fastest pace in nearly six years in October, heightening expectations that the recession is gathering pace as revisions to September’s data indicate that the economy shrank by more than initially thought between June and September.
The measure of industrial production, which counts for just under a fifth of Britain’s GDP, fell by 1.7 per cent in October, the biggest slump since January 2003, official figures show.
Output by manufacturers dropped by 1.4 per cent, the eighth consecutive monthly fall and the longest decline since 1980.
UK GDP during the third quarter was initially believed to have fallen by 0.5 per cent, but the actual decline, taking into account today’s data, is now expected to show growth contracted by 0.6 per cent.
October’s figures also indicate that the slowdown in the final three months of the year is set to be more severe. Some economists have said that a 1 per cent decline in GDP is possible, with more falls expected next year.
Britain is widely expected to officially fall into recession after the final three months of the year, when the country will have endured two consecutive quarters of negative growth – the technical definition of a recession.
Paul Dales, of Capital Economics, said: “The recession is clearly deepening and the downside risks to our forecast that the GDP will fall by 1.5 per cent next year are growing.”
Today’s figures will heap more pressure on the Bank of England to make more aggressive interest rate cuts to try and curb the economic downturn, with some analysts predicting that rates could fall as low as 0 per cent next year.
There was more gloomy news as separate figures showed that the UK trade deficit had widened to £7.8 billion, from £7.4 billion in September, indicating that the falling pound is not boosting manufacturers’ exports.
December 9, 2008
Grainne Gilmore
Source: Times Online