* Manufacturing, industrial output weaker than expected
* Construction falls in Nov from Oct
* Retail sales growth slows
* Sterling, gilt yields fall
By William Schomberg and David Milliken
LONDON, Jan 10 Britain's economic recovery got a
"reality check" on Friday when data showed weaker-than-expected
manufacturing output, a sharp fall in the construction sector,
and a slowdown in retail sales growth.
Economists said growth in the fourth quarter might now
struggle to keep up the pace which has made Britain one of the
fastest-growing economies among the world's rich nations.
Official data was not seen matching up with strong industry
Output for both manufacturing and industrial production was
flat month-on-month in November, and October's increases were
revised down, the Office for National Statistics said.
Economists in a Reuters poll had expected increases of 0.4
percent for manufacturing and industrial output in November.
The data was "something of a reality check for those getting
a little carried away by the strength of the UK recovery," said
James Ashley, senior economist with RBC Capital Markets.
HSBC's Simon Wells said Friday's data could reduce growth in
the fourth quarter to 0.6 percent from 0.8 percent in the
July-September period, unless there is a very strong performance
from the dominant services sector.
Bad weather in December could also weigh on gross domestic
product, he said.
Sterling fell and 10-year British government bond yields
touched their lowest level since Dec. 19.
The ONS also said output in Britain's construction sector
shrank by 4.0 percent in November from October, its sharpest
fall since June 2012 and a setback for a sector which has been
recovering from a long slump.
"The recovery in the UK remains broadly on track - but
today's data are a reminder that we have not yet reached the
sunlit uplands that would pave the way towards thoughts of
policy tightening," RBC's Ashley told clients.
The Bank of England has forecast economic growth of 0.9
percent in the October-December period and Friday's data could
help underscore its message that it is in no rush to raise
record-low interest rates.
"Talk of the UK being the first developed country to hike
rates looks rather misplaced," said Marc Ostwald, a fixed income
strategist at Monument Securities.
Adding to the sense of a recovery struggling to stay in high
gear, a separate survey showed British retail sales growth
slowed in December.
A first estimate of Britain's economic growth in the fourth
quarter is due to be announced on Jan. 28.
CONFIDENCE GOOD BUT MONEY IN POCKETS SHORT
Britain staged a surprisingly strong recovery in 2013 after
struggling to get over the financial crisis. But the economic
turnaround has depended largely on spending by consumers, many
of whom have been buoyed by a recovery in the housing market
while earnings fail to keep up with inflation.
A survey published on Friday by the British Retail
Consortium showed that sales in the busy shopping month of
December were 1.8 percent higher on the year compared with a 2.3
percent increase in November.
"While confidence levels were higher than the previous year,
this wasn't always matched by more money in pockets," BRC
Director-General Helen Dickinson said.
The outlook for Britain still contrasts starkly with grim
forecasts of a return to recession at the start of last year.
The economy is expected to expand by 2.8 percent this year,
according to the BoE. There have been some early signs of a
long-awaited shift towards more sustainable growth based on
exports and business investment.
Data on Thursday showed that while the country's trade
deficit remains wide, goods exports rose to several other
European countries, many of which are only starting to emerge
from the region's debt crisis.
However, British manufacturing remains 8.5 percent smaller
than its peak in 2008, before the financial crisis.
Weighing on overall industrial production in November was a
3.0 percent fall in oil and gas extraction compared with
October, largely caused by reduced output at Total's
St Fergus onshore North Sea gas terminal, ONS officials said.