September industrial output falls sharply, dents recovery hopes

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November 6, 2012 8:49 PM EST

Industrial output fell more than expected in September, data showed on Tuesday, reinforcing fears that Britain's recovery will struggle to gather pace towards the end of the year.

Manufacturing output rose by 0.1 percent in September on the month after a downwardly revised drop of 1.2 percent in August, the Office for National Statistics said. Economists had predicted a monthly 0.3 percent rise.

The wider reading of industrial output, which includes energy production and mining, fell by 1.7 percent in September after a 0.5 percent drop in August.

Excluding a decline in June that was affected by an extra public holiday, the monthly reading was the lowest since August 2009 and below forecasts for a 0.6 percent drop on the month.

The Bank of England will decide on Thursday whether to inject further cash into the economy to prop up the recovery after Britain emerged from recession in the third quarter.

The central bank has already bought government bonds worth 375 billion pounds in its quantitative easing programme.

Despite Britain's return to growth, manufacturers face tough times ahead as economic headwinds hold back demand at home and abroad.

Government spending cuts, tax rises and low wage growth have sapped consumer confidence, while the euro zone debt crisis has cast a dark cloud over the business outlook.

Worries about the recovery had already grown on Monday after a survey showed business in Britain's dominant services sector expanded at the slowest pace in almost two years in October and optimism about the outlook dimmed.

Industrial production was 0.9 percent higher in the three months that ended in September when compared to the previous three-month period. It was unchanged in the three months to August.

Mining and quarrying recorded its biggest monthly drop since February 1974, while oil and gas extraction posted the largest fall since records began in 1997.

Business surveys have indicated a weak start to the final quarter of the year and economists have pointed out that one-off factors contributed to Britain's return to growth in the third quarter. (Reporting by Peter Griffiths and Olesya Dmitracova)

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