UK manufacturing slumps at fastest pace since 1981

British factory output slumped in November at its fastest annual pace since 1981, increasing the likelihood that the economy shrank sharply at the end of 2008 and faces a deep recession in 2009.
The Office for National Statistics said manufacturing output was 7.4 percent lower than a year earlier, its biggest fall since June 1981 when Britain was in the throes of an industrial meltdown that decimated its car industry and coal mines.
Production was down 2.9 percent in November alone, the biggest monthly fall since one-off plant closures for Queen Elizabeth's jubilee in the summer of 2002, and more than four times the drop forecast by economists polled by Reuters.
Falls were driven by reductions in paper and printing, transport equipment and metal production.
"These numbers are even worse than we expected and twice as bad as October," said Philip Shaw, chief economist at Investec.
"We had already revised our gross domestic product (GDP) forecast for the fourth quarter down to -1.4 percent and -2.0 percent for 2009. We may have to take another look at that and push the numbers lower."
The only bright spot was a sharp fall in firms' inventories, which Shaw said put a cap on how fast output could fall in coming months.
Nonetheless, bad news for British manufacturing has continued since November, despite a fall in sterling making exports to the United States and the rest of Europe cheaper.
The Bank of England said on Thursday after it cut rates by 0.5 percentage points to a record low of 1.5 percent that weaker sterling should help provide support to economic activity this year, yet depressed global demand has limited any gains so far.
Policymakers expect price pressures to ease sharply this year as the global economic slowdown strips raw material producers of their pricing power.