UK factory output shrinks for fifth month

British manufacturing output fell for the fifth straight month in July, the longest stretch of declines in seven years, official data showed on Tuesday, in another sign the economy is slowing sharply.
The Office for National Statistics said manufacturing output fell 0.2% on the month and was 1.4% lower on the year as production of optical and electrical equipment fell. Analysts had predicted a monthly decline of 0.1%.
Factory output in the three months to July was 1.1% lower on the previous three months, the biggest rate of decline since November 2005.
The report dented expectations that a weaker pound would provide enough of a boost to the sector to shore up the overall economy.
The ONS said that while export sectors were holding up, anything linked to the consumer appeared to be suffering.
Sterling fell further after the figures, which heightened the gloom surrounding the outlook for the British economy as they followed reports earlier on Tuesday showing falling retail sales and house prices.
"Once again, it's grim news for manufacturing," said Philip Shaw, chief economist at Investec. "It would tend to support our call that the economy will be in recession by the end of the year."
Overall industrial output also fell more than expected in July, by 0.4% on the month. That took output 1.9% lower on the year. That was driven by routine maintenance work on oil rigs lowering oil and gas extraction output.
The British economy stood still in the second quarter and many analysts are predicting a further deterioration in the second half of the year as the housing slump spreads through the economy.
But the Bank of England has held interest rates steady since April as it is worried about high inflation, currently running at more than twice the central bank's target.
Inflation is set to climb higher still next month but after that economists say the fall in world oil prices should help tame price pressures and give the BoE room to cut interest rates.