Factories figures reveal surprise slowdown

Manufacturing industry suffered an unexpected slump in December, according to a report published just a day after the Bank sparked a row by raising interest rates.

Manufacturing industry suffered an unexpected slump in December, according to a report published just a day after the Bank sparked a row by raising interest rates.

Output from factories fell 0.3 per cent in the last month of 1999, against expectations of a 0.3 per cent rise. The fall was caused by a combination of a widespread shutdown over the extended Christmas holiday and the impact of firms stockpiling in the autumn ahead of feared millennium bug chaos.

Analysts said the surprise slowdown raised fears that the manufacturing success story had already started to falter.

The Office for National Statistics said the trend was still one of recovery in the manufacturing sector, which is just climbing out of recession. The sector that led the recovery - chemicals - suffered the worst fall, dropping 2.3 per cent. The ONS said pharmaceuticals also suffered as customers who had raised their stocks in October and November cancelled orders in December.

Industrial production, which includes oil, gas and electricity supply, fell 0.5 per cent against forecasts of a 0.4 per cent rise. Oil and gas extraction fell 1.0 per cent while electricity and gas supply to customers dipped 1.4 per cent, in part due to the industrial shutdown.

Industry leaders and trade unions greeted Thursday's rise in interest rates to 6 per cent with fury, saying manufacturers were paying the price for controlling house-price booms in the South-east.

Separately, Halifax, Britain's biggest mortgage lender, and Lloyds TSB's mortgage arm, Cheltenham & Gloucester, both said they would raise mortgage rate by 25 basis points to 7.74 per cent from 1 March. Others, including Bradford & Bingley, Northern Rock and Woolwich, said they had made no change.