* Factory output suffers biggest monthly drop since June
* Oil and gas output suffers biggest ever annual fall
* Figures point to economic contraction in fourth quarter
By Olesya Dmitracova and Jonathan Cable
LONDON, Dec 7 British industrial production
unexpectedly fell in October after factory output posted its
biggest drop since June, reinforcing fears that the economy will
shrink again at the end of this year.
It combined with weak trade data earlier in the week to cast
doubt on lingering government hopes of an export-led recovery.
Britain has suffered two recessions in the past four years,
the last one ending barely three months ago, at least partly
thanks to a boost from the Olympics.
Finance minister George Osborne warned on Wednesday of far
slower economic growth ahead than previously thought, and
official forecasts signalled another contraction in the final
quarter of this year.
In Friday's figures, manufacturing output dropped 1.3
percent in October after stagnating in September and was 2.1
percent lower than a year earlier, the Office for National
The broader measure of industrial output, which accounts for
over 15 percent of Britain's gross domestic product, also fell
both on the month and the year in October, after oil and gas
extraction posted the sharpest yearly fall since records began
"Very disappointing, triple dip here we come," said Alan
Clarke, economist at Scotiabank. "Manufacturing was diabolical.
Sadly, I think there is not a lot to suggest that it is
temporary. Survey data has been fairly downbeat."
Industrial output, which includes energy production and
mining as well as manufacturing, fell 0.8 percent on the month,
confounding forecasts for a rise, after a 2.1 percent decline in
Oil and gas extraction plunged by well over a quarter on the
year, partly due to maintenance which led to a temporary
shutdown of the largest oil field in the North Sea. Greater than
usual maintenance as well as a long-term decline in Britain's
North Sea oil reserves have sapped output in the past 12 months.
Both the monthly and annual manufacturing declines were the
steepest since June, when extra public holidays dented
production, and were far worse than predicted by economists.
The production of food, beverages and tobacco was
particularly low, with demand for beer down, the ONS said.
David Tinsley, economist at BNP Paribas, attributed some of
the weakness to a drop-off in demand for food and beer after it
was boosted by the London Olympics and Paralympics which ended
A darker economic outlook for the coming months and years
has brought Britain closer to an embarrassing loss of its prized
triple-A credit rating, after ratings agency Fitch warned that
Osborne's admission he will miss a key debt-cutting goal
undermined his fiscal credibility.
Echoing that, Chris Williamson, economist at survey compiler
Markit, said in a comment on the industrial production figures:
"The concern is that any new (economic) downturn will ... put
further pressure on the UK's triple-A credit rating."
Economic uncertainty, below-inflation wage growth and
Osborne's austerity measures have kept a lid on demand for
manufactured goods at home.
Meanwhile, global economic headwinds have reduced the
appetite for Britain's wares abroad -- particularly in the euro
zone -- and the value of its goods exports fell in October to
the lowest level since June.