Plunge in output raises fears of a triple-dip recession

The ONS singled out lower public demand for beer as a prime culprit

Manufacturing slumped in October, exacerbating fears that Britain is on the verge of a "triple-dip" recession.

Output fell by 1.3 per cent on the previous month, the fastest pace of decline since June, when production was disrupted by extra public holidays.

The Office for National Statistics said the decline was driven by weakness in the food and beverage sector, singling out lower public demand for beer as a prime culprit.

The news came as a nasty surprise to City analysts, who had pencilled in a modest 0.2 per cent monthly decline for the sector.

"Triple-dip watch starts here," said Alan Clarke of Scotiabank. "The only thing that can save us is the monthly services output data released at the end of the month."

Howard Archer, of IHS Global Insight, described it as a "dire set of data", and added: "It looks increasingly inevitable that GDP will suffer a renewed drop in the fourth quarter."

The ONS figures also showed the sharpest yearly drop of oil and gas extraction since 1988, thanks to extended maintenance work to mend a North Sea leak.

The economy grew by 1 per cent in the third quarter of 2012, pulling the UK strongly out of a nine-month recession. But a plethora of economic indicators have turned negative in recent months, prompting fears that the output will fall again when the preliminary ONS estimates for fourth-quarter GDP are released in January.

This week the Office for Budget Responsibility joined the Bank of England in forecasting a modest decline in GDP in the last three months of this year.

Despite the signs of economic deterioration, the Bank's Monetary Policy Committee voted to keep its £375bn money-printing programme on hold this week.

The Treasury and the Bank have put their hopes of an economic revival on a Funding for Lending scheme, designed to encourage banks to make more credit available to small businesses and homebuyers. But the FLS has got off to a slow start, with data this month showing that banks increased lending by just less than £500m in the first two months of the scheme.

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